Are one company's troubles another's gain? That may be the case for Japanese real estate developer Urban Corp., which is up for auction after filing the biggest bankruptcy in Japan this year based on debt of ¥255.8 billion and ($2.3 billion), according to Bloomberg.
Now, at least 10 bidders from U.S. and European funds and Japanese real
estate developers have all put their names in the running for the
Urban auction, Bloomberg reports. The developer has $4.4 billion in
assets that include properties throughout Japan as well as deposits and
loans. But as enticing as Urban may be, for one bidder, Merrill Lynch
& Co., might the risk be too high given the firm's current troubles?
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Yes, the time to buy low is now, but how long will it take for Merrill to sell high? Credit markets are tightening and buyers are scarce. Meanwhile, Merrill's troubles are far from over. The bank's shares have dropped nearly 55% since December, when its heavy investments in collaterilized debt obligations forced it to turn sovereign wealth funds for fresh capital. It's even had to sell its 20% prized stake in financial media company Bloomberg LP for about $4.5 billion.
A Merrill win of an Urban auction would essentially translate into exchanging its proceeds from the Bloomberg stake for the Japanese real estate developer's assets. Does that seem like a fair deal? A gambling man would probably say yes, choosing the long-term gain of Urban's assets over owning a stake in the stability of Bloomberg, but Merrill is too weak to gamble. After all, Merrill's gunslinging investment ways is what got it into its mess in the first place. - Gerald Magpily
See Bloomberg article
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