Merrill Has $5.7 Billion of Writedowns, Sells Shares

By Bradley Keoun and Christine Harper

July 28 (Bloomberg) -- Merrill Lynch & Co. took steps to shore up its endangered credit rating by selling $8.5 billion of stock and liquidating $30.6 billion of money-losing assets at a fifth of their original value.

Temasek Holdings, the Singaporean government investment fund that bought shares in Merrill last December to become the firm's biggest investor, will buy $3.4 billion of stock in the new offering, New York-based Merrill said today in a statement. Merrill will book a $2.5 billion expense related to the transaction as well as $5.7 billion of additional writedowns on collateralized debt obligations and associated hedges.

Merrill Chief Executive Officer John Thain is pushing to rid the firm of its CDOs, which have contributed the majority of $18.7 billion of net losses reported over the past four quarters. Thain, 53, has had to raise capital to stave off credit-ratings downgrades and demonstrate to regulators that the firm can withstand losses. Standard & Poor's on June 2 cut Merrill's rating to A from A+ and assigned a ``negative'' outlook, indicating additional downgrades were possible.

Merrill Has $5.7 Billion of Writedowns, Sells Shares....