Merrill Lynch (MER Quote), which has suffered billions of dollars of credit-related writedowns in recent quarters, set plans to sell a large chunk of the asset-backed securities on its books and raise new equity capital through a stock offering.
The brokerage firm said after the close of trading Monday that it will sell $30.6 billion of U.S. super senior ABS collateralized-debt obligations to an affiliate of Lone Star Funds for $6.7 billion. At the end of the second quarter, the CDOs were carried at $11.1 billion, and in connection with the sale, Merrill will record a pretax writedown of $4.4 billion in the third quarter.
All told, the move will cut Merrill's domestic super senior ABS CDO long exposures from $19.9 billion on June 27 to $8.8 billion. ...
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