MERRILL LYNCH DUMPING CDOs ONCE WORTH $30.6 BILLION FOR 22 CENTS ON THE DOLLAR

July 29th, 2008

It looks like the race is on to try to mark this crap down to the point where some hedge fund buys it for pennies on the dollar.

This race started when National Australia Bank bank tapped the mat and wrote off 90% of its U.S. AAA rated debt.

When that happened, all the firms must have known that the game was up.

Events could move very quickly now.

Via: Reuters:

Merrill Lynch & Co said on Monday it will take a $5.7 billion third-quarter write-down as it unloads huge amounts of risky debt, and will raise $8.5 billion by selling new stock.

The Wall Street investment bank and brokerage announced its plans less than two weeks after posting a $4.9 billion second- quarter loss, hit by $9 billion of write-downs in that period.

In a sign of how toxic Merrill’s debt holdings have become, it has agreed to sell $30.6 billion of collateralized debt obligations (CDOs), a kind of repackaged debt, to an affiliate of private equity fund Lone Star Funds, for just $6.7 billion, or about 22 cents on the dollar.

The fire sale nature of that deal will add to concerns that the global credit crisis, which has already led to more than $400 billion of write-downs and losses at major banks, still has a long way to run.

Posted in Economy | Top Of Page

2 Responses to “MERRILL LYNCH DUMPING CDOs ONCE WORTH $30.6 BILLION FOR 22 CENTS ON THE DOLLAR”

  1. Loveandlight says:
    July 29, 2008 at 6:04 pm

    And despite this, the Dow Jones Industrial Average is rocketing back up today after plummeting way down yesterday. The Plunge Protection Team must have a mind-boggling amount of liquidity to play with to be able to manage things the way they do.

  2. Eileen says:
    July 30, 2008 at 12:29 am

    Spins my head to imagine the journal entries in the Merrill Lynch ledgers. On paper, that’s a whooping $23.9 BiLLION dollar LOSS!!!!!
    I can understand wanting to UNLOAD this stuff pronto.
    However, what I do not understand is why ANYONE would then turn around and invest in Merrill Lynch “new” stock! I can’t imagine what “value” can be added to a person’s portfolio by holding stock in a company that is basically a holding company for paper assets.
    I don’t get it.
    I know the stock market has lost all appeal as investment vehicle for me and so I don’t put a lot of thought into stocks anymore.
    Can someone explain to me why an investment into Merrill Lynch would be attractive at this time?

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