Bankruptcy

Merrill Looking for More Foreign Money After 15 Billion Loss

By J. Michael McBride

"Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate, prompting the firm to raise additional capital from an outside investor.
...
To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.
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Mr. Thain, who won plaudits as head of the New York Stock Exchange, has wasted little time. After he took over last month, Merrill Lynch promptly sold a $5.6 billion stake to Temasek Holdings, which is controlled by the government of Singapore, and Davis Selected Advisers, a money management firm based in Tucson.
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Merrill is hardly alone in seeking capital from overseas. United States financial institutions have raised more than $29 billion from foreign governments and their related investment entities, according to the market research firm Dealogic.

In recent months, the Government of Singapore Investment Corporation, Singapore’s lesser-known government fund, invested $9.7 billion in UBS; Citigroup sold a $7.5 billion stake to the Abu Dhabi Investment Authority; and the China Investment Corporation poured $5 billion into Morgan Stanley.

If a foreign government takes another big stake in Merrill, Congress might ratchet up its scrutiny of sovereign wealth funds, which have ballooned thanks to rising oil prices and booming emerging markets.
On Thursday, Senator Charles E. Schumer, Democrat of New York, expressed concern about the amount of money American financial institutions are contemplating raising from sovereign wealth funds."

Here is a link to the entire article from the NY Times: http://www.nytimes.com/2008/01/11/business/11wall.html?ei=5090&en=7ed5049664cce2c4&ex=1357707600&partner=rssuserland&emc=rss&pagewanted=print

Also, here is a link to an article which does an excellent job of explaining soverign wealth funds: http://topics.nytimes.com/top/reference/timestopics/subjects/s/sovereign_wealth_funds/index.html?inline=nyt-classifier

Michael

Full post as published by Texas Lawyer Blog on January 11, 2008 (boomark / email).