Mumbai: US investment bank Merrill Lynch will get a fresh cash injection of $900 million from Singapore sovereign wealth fund Temasek Holdings as the the debt-laden bank announced an $8.5 billion fund-raising effort.
Merrill lynch, which registered a $4.9 billion second-quarter loss, also reported a $5.7 billion write-down in the third-quarter.
Temasek said Merrill has agreed to give it a rebate of $2.5 billion on its original $4.4 billion stock purchase as the fund had been facing a $48 a share loss on its initial investment in Merrill as banking stocks slid amid writedowns on risky debt.
The Singapore fund said it will reinvest that money and another $900 million in new Merrill stock, thereby raising its Merrill Lynch stake to over 10 per cent.
Neither Merrill nor Temasek disclosed the price at which the new Merrill shares would be offered.
Merrill, like other big Wall street banks that were reeling from losses related to the US mortgage market, are increasingly dependent on sovereign wealth funds from Asia and the Middle East to stay afloat.
But these wealth funds are in turn increasingly being sucked into the vortex of huge losses amidst a continuing slide in the value of those investments.
Temasek and its larger sister fund GIC has invested in banks, including Citigroup and UBS.
Temasek had invested a total of $5 billion in Merrill Lynch in December and February, under a deal that required Merrill to compensate the Singapore investor should the US firm subsequently raise new capital at a lower price.
The latest investment is subject to approval by US regulators as it could result in Temasek's owning more than 10 per cent of the US bank.