Rolf Englund IntCom internetional
Don't look now, but the end of the denial phase of the credit crisis may be in sight.
When Merrill Lynch (MER, Fortune 500) on Monday sold a $30.6 billion portfolio of risky mortgage debt for 22 cents on the dollar, it took a big - though by no means final - step toward providing the sort of transparency that will have to sweep through the financial sector before any sustained rebound can take place.
"I have previously argued that mark-to-market losses exaggerate the severity of the credit crisis," wrote investment strategist Ed Yardeni in his e-mail newsletter Tuesday. "Then again, Merrill Lynch converted its mark-to-market losses into permanent ones.... This is bad news for other investment banks and commercial banks trying to get rid of loans and securities in a market flooded with distressed assets."
This isn't to say Merrill's news is all good. To the contrary, Merrill did the deal on extremely unfavorable terms. Besides taking a paltry price, the firm agreed to finance 75% of the CDO purchase. That raised eyebrows because Merrill is effectively on the hook for any losses in the portfolio beyond the $1.7 billion payment being made by Lone Star.
That arrangement is similar to the one used earlier this year by Swiss bank UBS (UBS), which like Citi and Merrill has been laboring under a massive inventory of toxic mortgage-related debt
Merrill Lynch tvingas till ytterligare nedskrivningar på 5,7 miljarder dollar
Merrill Lynch reported a loss for 2007 after a $14.1bn write-down related to sub-prime mortgages.
Merrill Lynch & Co Inc may get up to $5 billion in a capital infusion from Singapore state investor Temasek Holdings,