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cash search continues for Merrill Lynch, to sell $8.5 bln stock!

By Amarendra Bhushan for CEOWORLD Magazine Updated:July 29, 2008

The cash search continues for Merrill Lynch, the nation’s largest brokerage. After stunning Wall Street with a huge quarterly loss, Merrill Lynch shocked the market last night when it moved to raise $8.5bn (£4.3bn) through a public share offering to shore up its balance sheet. Merrill’s chief executive John Thain has come under huge pressure to restore financial stability and the bank’s credibility.

Merrill Lynch & Co. (MER) chief executive John A. Thain said the sale of the worrisome investments, known as collateralized debt obligations, or C.D.O.’s, was “a significant milestone in our risk reduction efforts. “What they sold, from a headline standpoint, is certainly constructive because they have reduced risk in a very sensitive area,” said Thomas C. Priore, chief executive of Institutional Credit Partners, a $12 billion hedge fund and C.D.O. manager in New York.

“Right now, what you are seeing with financials is a crisis of confidence,” said Doug Roberts, an analyst with Channel Capital Research in New Jersey.”What they are trying to do is get the bomb off their books.” Denis J. Amato, chief equity strategist with Ancora Advisors in Cleveland, said more volatility in the stock markets would continue as long as the woes of the nation’s big banks continue.

- The Wall Street firm said it plans to raise $8.5 billion by selling shares
- $3.4 billion going to the Singaporean sovereign-wealth fund Temasek.
- Temasek bought $5 billion in Merrill shares in December.
- Merrill also agreed to sell a package of collateralised-debt obligations to private-equity firm Lone Star Funds for $6.7 billion.
- CDOs had a stated worth of $30.6 billion but were on Merrill’s books at $11.1 billion.
- The bank will take a $4.4 billion writedown this quarter.
- Shares of Merrill closed down more than $3 at $24.33.
- International Monetary Fund said there was no end in sight to the housing slump.
- Merrill said it would raise $8.5 billion in new capital from common shareholders.
- Merrill recently moved to raise money by selling its 20 percent stake in Bloomberg L.P.
- Shares in Merrill had ended the day down 11.6% at $24.33.
- It recently sold its 20% stake in the financial news provider Bloomberg to raise money .
- Singapore’s sovereign wealth fund Temasek agreed to buy $3.4bn of the public offering.
- Temasek Holdings Pte. Ltd. had already invested $4.4bn in return for a Merrill stake last December.
- Two weeks ago, Merrill reported a $4.65 billion second-quarter loss.

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