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Merrill to Raise Capital, Sell CDOs

Because of the transactions, Merrill expects to record a total pretax writedown in the third quarter of roughly $5.7 billion, including the $4.4 billion for the loss on the sale of the CDOs. The company will also take a $500 million loss on the termination of the hedges with XL Capital and a maximum $800 million loss on the potential settlement of other hedges.

Also in the third quarter, Merrill will likely record an expense of $2.5 billion related to a reset payment to Temasek and $2.4 billion of additional dividends as part of a plan to exchange certain existing mandatory convertible preferred stock for common stock.

Shares of Merrill initially fell more than 5% in after-hours trading, but then erased the bulk of the losses. Recently, Merrill was down 0.3% at $24.25. In the regular session, Merrill dropped 11.6% to $24.33.


TheStreet.com Ratings issues financial strength ratings on each of the nation's 8,600 banks and savings and loans which are available at no charge on the Banks & Thrifts Screener. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the Insurers & HMOs Screener.

This article was written by a staff member of TheStreet.com.
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