It's a new year, but the same old problems exist for Merrill Lynch & Co. After a disastrous 2007, it seems Merrill Lynch is still in dire need of cash, so it may continue to seek additional capital infusions from Chinese and Middle Eastern sovereign wealth funds, or will new CEO John Thain opt to sell its stake in BlackRock Inc.?
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The New York-based bank tapped into a sovereign wealth pool in 2007 by selling $6.2 billion in stock to Singapore's Temasek Holdings Pte. Ltd. and Davis Selected Advisors LP on Dec. 26. But can Merrill Lynch afford to dip into that well again?
In the upcoming election cycle, sovereign wealth funds are likely to garner more political scrutiny, which could lead the spiggot of foreign capital to close and thereby force Merrill to seek alternatives. BloggingStocks.com suggests another option: sell some of the 49.8% it owns in BlackRock Inc.
Remember BlackRock? Merrill acquired a larger stake in the investment firm in 2006. The investment has paid off as BlackRock's stock is near a 52-week high and the company has grown to a $14 billion market capitalization. Plus, BlackRock CEO Larry Fink, who was passed over for the Merrill corner office in favor of Thain, may be especially receptive to the disengagement of the two firms.
The need for cash is immense because Merrill may have to write down as much as $10 billion to $15 billion due to its collaterized debt obligations, when it reports its earnings in February, according to The Observer. And according to SEC rules, Wall Street banks are required to have certain levels of liquidity to match their obligations. - Gerald Magpily
See story from BloggingStocks.com
See story from The Observer
See TheDeal.com: Merrill sells stake to investors
See TheDeal.com: Merrill sells MLIM to BlackRock
