$15 billion hit for Merrill Lynch
11 January 2008
Los Angeles: Merrill Lynch is widely expected to be hit by $15 billion in losses cropping from mortgage investments gone bad. This number is almost double of what was originally estimated, and has prompted the company to raise additional capital from an outside investor, as reported by The New York Times.
Merrill is the largest brokerage firm in the US, and expected to report huge write-downs when it reports its earnings next week. Reports indicate the losses to be far higher than Wall Street estimates which put them at around $10 billion to $12 billion.
To support its deteriorating financial position, the company is also reported to be in discussions with potential investors in the US, Asia, the Middle East, and some private equity firms. Reports indicate that the company is looking to raise around $4 billion.
Merrill Lynch is the latest to be hit by losses stemming from the mortgage crisis that is extracting its pound of flesh from many Wall Street lenders. Reports across the media indicate that John A Thain, who became the company's chairman and chief executive in December, has his task cut out for him, with his agenda being set for him in his endeavours to bolster the firm's capital, and polish its reputation.
Thain, has already sold a $5.6 billion stake to Singapore government investment firm Temasek Holdings, and Tuscon money management firm Davis Selected Advisers.
Reports indicate that Thain is considering liquidating ''non-core'' assets, such as Merrill's stake in Bloomberg. The New York Times quoted a research report by Brad Hintz, a securities analyst at Sanford C. Bernstein & Company, in indicating that the stake was worth around $4 billion.