Merrill Lynch raises $7.5bn in sale

by Gill Montia

Story link: Merrill Lynch raises $7.5bn in sale

Merrill Lynch has raised $7.5 billion from the sale of part of its lending business and a share in the investment bank.

John Thain, Merrill’s new chief executive, is reported to have agreed the disposals “at a substantial discount”.

Just under 10% of the bank has been acquired by two investors, for $6.2 billion: Temasek Holdings, the investment house owned by the Government of Singapore, and Davis Selected Advisors, a US fund manager.

GE Capital, the global financial conglomerate, has acquired part of the bank’s lending business, comprising over $10 billion of assets and $5 billion of commitments.

Mr Thain explained that: “One of my priorities was to strengthen the balance sheet, and … we have made great progress towards that by bolstering our capital position through these investments.”

He also reassured existing shareholders that the new investors “would have no role in the governance of Merrill Lynch”.

The bank’s need to bolster its balance sheet has been heightened by predictions that the sub-prime-related writedowns recorded by many Wall Street financial institution in the third-quarter, will be at least as high as in the fourth-quarter.

In addition, Meredith Whitney, a leading US banking analyst with CIBC World Markets, has forecast that the bank will write off another $7 billion of bad investments during the fourth-quarter and that writedowns will continue throughout next year.