Merrill turns to Singapore, others for help

Jill Barshay Dec 24, 2007
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Merrill turns to Singapore, others for help

Jill Barshay Dec 24, 2007
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AMY SCOTT: Merrill Lynch got an early Christmas present today in the form of a multibillion-dollar cash infusion. The investment bank, as you know, has been through a bit of a rough patch lately. Merrill lost more than $2 billion last quarter on bad subprime mortgage investments. Today some big investors stepped forward with a little help. Marketplace’s Jill Barshay has more from New York.


JILL BARSHAY: Merrill Lynch said today it’s getting more than $6 billion for selling a 15 percent stake in itself. Most of the money is coming from Temasek. That’s an investment arm for the government of Singapore. An Arizona group, Davis Advisers, is kicking in about $1 billion of it, too.

Benjamin Wallace is a securities analyst at Grimes & Co. in Massachusetts. Grimes owns shares in Merrill. He says the Davis group is kind of like Warren Buffet. They hold onto investments for a long time.

Benjamin Wallace: It’s good to see them being involved in this beyond just another sovereign wealth fund stepping up.

Wallace says Merrill was desperate to come up with cash to cover its subprime mortgage losses. It’s selling shares to the Singapore and Davis investors at a big discount of about 10% a share.

Wallace: Beggers can’t be choosers. It’s issuing stock at a price you’d probably rather not issue it, which they’re doing with this deal.

Merrill is also selling one of its corporate lending divisions to General Electric. John Oliver is a spokesman for the buyer, GE Capital.

John Oliver: We’re getting about $15 billion worth of really, really good loans. We’re not getting anywhere near the subprime stuff.

The markets rose today. They liked Merrill’s new cash.

Grimes & Co.’s Wallace says the more cash that Merrill and other big banks raise, the sooner they’ll be able to start lending it out again. And that’s an important step in relieving the credit crunch.

In New York, I’m Jill Barshay for Marketplace.

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