Merrill negotiates $5bn from Temasek as sub-prime losses mount

by Gill Montia

Story link: Merrill negotiates $5bn from Temasek as sub-prime losses mount

Merrill Lynch, the US investment bank, is reported to be in advanced talks with Temasek Holdings, the investment house owned by the Singapore Government, over a $5 billion injection of capital.

The bank has been one of the biggest casualties of the US sub-prime mortgage crisis and is expected to write down a further $8 billion by the end of the year, taking its total mortgage losses for 2007 to $15.9 billion.

Other options to offset the losses include the sale of Merrill’s 20% share in Bloomberg, the financial information company, or its 49% stake in US fund manager, BlackRock.

Temasek Holdings is a long-established sovereign fund with assets in the region of $108 billion and the approach by Merrill follows similar moves by other Wall Street banks.

Earlier this week Morgan Stanley agreed to sell a 9.9% share in the business to the state-run China Investment Corp, for $5 billion.

Meanwhile, Citigroup has secured a $7.5 billion injection of funds from the Abu Dhabi Investment Authority and UBS, the Swiss investment bank, is in the process of raising $11.2 billion by selling a total 11.5% share to the Government of Singapore Investment Corp and an unnamed Middle Eastern investor.

The latter will not be named because the share of the bank being acquiring is less than 3%, but it is rumoured that the Saudi Royal Family is involved.