Merrill Lynch plans to raise $8.5bn through new shares as the US investment banking giant faces a further $5.7bn write-down in Q3.
Wall Street was stunned by the surprise statement last night, with Merrill’s share price plunging 11.6%.
The majority of the write-down will come from the $11.1bn sale of collateralised debt obligations (CDO) securities, also announced yesterday.
Merrill’s has been hit hard by the sub-prime related credit crisis, with over $18bn of losses and about $40bn in write-downs over the past year.
Earlier this month, Merrill sold its 20% stake in news group Bloomberg and a controlling interest in Financial Data Services for a combined $8bn.
Singapore’s Temasek Holdings will purchase $3.4bn of common stock in the public offering.
“The sale of the substantial majority of our CDO positions represents a significant milestone in our risk reduction efforts,” Merrill Lynch chairman and CEO John Thain says.
“Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position by issuing common stock.”IFAonline
All-day event on 24 April
Consequences could be more severe than in stress tests
AFH has six segregated mandate funds
Variable operating expenses