Singaporean state-owned investor Temasek Holdings Pty. Ltd., already Merrill Lynch's biggest shareholder, will buy $3.4 billion of the new stock on offer, though under an earlier price protection agreement Merrill will effectively fund $2.5 billion of its investor's share purchase. Temasek spent $5 billion on Merrill stock in December and February at $48 per share; Merrill stock closed Monday at $24.33.
Merrill Lynch also said it will cut its exposure to collateralized debt obligations by $11.1 billion by selling securities at a discount to Lone Star Funds. The CDOs changing hands had a gross notional value of $30.6 billion, whereas Lone Star will pay $6.7 billion, equivalent to a price of 22 cents on the dollar. Merrill also agreed to terminate CDO hedges with monoline guarantor XL Capital Assurance Inc., a move that will cost Merrill $500 million, and is in talks to settle with other monolines, for which it has taken another $800 million charge.
The initiatives come less than two weeks after Merrill posted a $4.7 billion second-quarter loss, after more than $9 billion of write-downs. At the time it raised $4.4 billion by selling its 20% stake in news and information group Bloomberg LP to Bloomberg Inc. and announced a nonbinding agreement to sell a controlling interest in Financial Data Services Inc. in a deal which valued the whole administrative services group at $3.5 billion. -
Laura Board
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