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interestrateripoff

Merrill Lynch Forced To Take Emergency Action Ahead Of Writedown

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http://business.timesonline.co.uk/tol/busi...icle4420207.ece

Merrill Lynch sought to bolster its balance sheet and reduce its risk last night when it announced moves to raise $8.5 billion (£4.27 billion) and the sale of $11.1 billion worth of high-risk mortgage-backed securities.

The group said it would record a $4.4 billion writedown in its third-quarter from the sale of the securities, known as collateralised debt obligations (CDOs), or pools of mortgage bonds, in a disposal that represented the majority of Merrill’s remaining CDO portfolio.

Merrill said it planned to raise $8.5 billion by selling shares equivalent to more than a quarter of its market capitalisation in a move that will significantly dilute the existing investors’ ownership.

Some $3.4 billion of the shares will be acquired by Temasek, the Singaporean wealth management fund. Temasek is already an investor in Merrill, after buying 87 million shares in December.

Merrill appears to be in a bit of trouble then?? The cash fast running out?

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http://business.timesonline.co.uk/tol/busi...icle4421125.ece

UK banking stocks today plummeted on fears of a new round of capital-raising after America's Merrill Lynch last night revealed plans to bolster its balance sheet by raising $8.5 billion (£4.27 billion) and selling $11.1 billion-worth of high-risk mortgage-backed securities.

Shares in Barclays were down 6.35 per cent, or 21.7p, to 317.25p in early trading, while stock in Royal Bank of Scotland fell 3.7 per cent, or 7.65p, to 198.6p, and HBOS plummeted 4.9 per cent, or 14.5p, to 273.25p.

Simon Willis, an analyst at NCB Stockbrokers, said: "Anything that flags further capital-raising is bad for the sector", while Nic Clarke, an analyst at Charles Stanley Securities, said: "It is a volatile time for UK banks and Merrill Lynch has not helped the sentiment."

Merrill Lynch said it would record a $4.4 billion writedown in its third quarter from the sale of the securities, known as collateralised debt obligations (CDOs), or pools of mortgage bonds, in a disposal that represented the majority of Merrill’s remaining CDO portfolio.

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These sums are too mind-blowing aren't they. I am amazed that no banker has yet come up with the idea of writing all their debt on a piece of paper and then losing it down the back of a sofa somewhere.

Perhaps all the banks will get together, admit the numbers are simply silly, shake hands and agree to write everything off so they can start again.

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http://www.economist.com/finance/displaySt...atures_box_main

IF THE definition of insanity is doing the same thing over and over again and expecting a different outcome, bank shareholders are certifiably mad. Time and again since the start of the credit crunch, shares in one bank or another have rallied after the announcement of another slug of write-downs on mortgage-related assets and other nasties. With each round of bad news, investors dare to hope that a bottom has been reached and that the bank in question can start to think about a return to health. Invariably their hopes have been dashed.

The pattern has repeated itself this month with Merrill Lynch. In mid-July, the investment bank announced a $4.6 billion loss for the second quarter, after a write-down of $9.4 billion. To help plug the hole in its finances, John Thain, Merrill’s newish chief executive, offloaded a long-prized 20% stake in Bloomberg, a financial-information provider. “We believe that we are in a very comfortable spot in terms of our capital,'” he told analysts. Could the worst finally be over, wondered investors?

On Monday July 28th, Mr Thain had a swift answer: no. Merrill announced more write-downs, this time to the tune of $5.7 billion, and further steps to bolster its capital through an $8.5-billion share offering (a figure that may rise to $9.8 billion). Temasek, a Singaporean fund that became Merrill’s largest shareholder when it raised capital in December, will buy $3.4 billion of the new stock, but will also be reimbursed for the losses it has suffered on its initial investment.

The speed of the about-turn does little for Mr Thain’s credibility, but this time it is not lunacy to wonder whether a turning-point has been reached. The new write-downs reflect a deal to sell collateralised-debt obligations (CDOs) with a nominal value of $30.6 billion at an eye-watering discount to a distressed-debt investor called Lone Star Funds. The CDOs are being sold for just $6.7 billion, valuing them at a mere 22 cents on the dollar. To make the deal even sweeter for Lone Star, Merrill is lending it money to complete the deal, using the very same toxic assets it is trying to get rid of as collateral. Merrill is also slashing the value of hedges it had bought from various bond insurers.

Edited by interestrateripoff

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Perhaps all the banks will get together, admit the numbers are simply silly, shake hands and agree to write everything off so they can start again.

And give back all the bonus's they made by juggling those silly numbers.

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Guest Shedfish

isn't this the 'mark to market' cataclysm everyone's been trying to avoid at any cost?

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  • 396 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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