More write down for Santa Clause and more cash injection
THE RATINGS GAME Analyst warns Merrill's write-downs may mount
By Murray Coleman, MarketWatch Last update: 1:54 p.m. EST Dec. 20, 2007Print E-mail RSS Disable Live Quotes SAN FRANCISCO (MarketWatch) -- Merrill Lynch & Co. could face another $8.6 billion in mortgage-related write-downs in the fourth quarter, according to new research by Fox-Pitt Cochran Caronia analyst David Trone. That would come on the heels of the previous quarter's $7.9 billion hit, the analyst said in a Thursday report. Trone lowered his fourth-quarter earnings-per-share estimate on Merrill Lynch (MER:Merrill Lynch & Co., Inc News, chart, profile, more Last: 54.50-0.23-0.42%
4:00pm 12/20/2007
Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: MER 54.50, -0.23, -0.4%) to a loss of $4.07 from a gain of $1.51, previously. The change reflects rising expectations that the financial-services giant will report more problems with its asset-backed securities and collateralized debt obligations portfolios, Trone wrote. Merrill Lynch had $15.8 billion in CDOs and $5.7 billion in subprime mortgage-related exposure at the end of the third quarter, according to Trone. Within the CDO portfolio, Fox-Pitt's analysts are now expecting write-downs of some $3.1 billion in high-grade assets in the quarter. Trone also figures another $2.9 billion in mezzanine financing to be impacted. "We also project about $1.4 billion in write-downs on the $5.7 billion subprime mortgage portfolio," Trone added, who outlined several other smaller types of risky areas of Merrill Lynch's holdings that could be addressed in the fourth quarter. Earlier this month, Citigroup analysts also said they were bracing for more mortgage-related write-offs from Merrill Lynch. But those were listed at about half what Fox Pitt's Trone is now projecting. On Wednesday, several banks including Merrill Lynch and Bear Stearns (BSC:The Bear Stearns Companies Inc News, chart, profile, more Last: 91.42+0.82+0.91%
4:01pm 12/20/2007
Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: BSC 91.42, +0.82, +0.9%) were reported as negotiating to bail-out over-the-counter-listed bond insurer ACA Capital (ACAH:aca capital holdings inc com News, chart, profile, more Last: 0.80+0.15+23.08%
3:59pm 12/20/2007
Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: ACAH 0.80, +0.15, +23.1%) . ACA has guaranteed $26 billion in mortgage securities, and the insurer's woes could force the banks to take on billions in losses they had insured against, the New York Times article said. Standard & Poor's has warned ACA that it may lose its A rating. It is unclear how much capital it would take to shore up ACA, the report added, and another solution the banks are discussing would relieve ACA of having to post collateral against its insurance contracts if the company is downgraded. "We believe Merrill, like its peers, has entered hedging contracts with ACA [Capital Holdings]," Trone said. "Should ACA falter, Merrill would end up with more subprime exposures as those hedging contracts terminate. This will in turn lead to more write-downs." Murray Coleman is a reporter for MarketWatch in San Francisco Companies in this story Merrill Lynch & Co., Inc (MER) The Bear Stearns Companies Inc (BSC) Aca Capital Holdings Inc (ACAH)
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Ken1, i don't agree with you. Foreign countries are not stupid, esp. Singapore and China. They know what they are getting into. We lay people only see the surface and don't really understand the whole situation. aThey are in for the long run and m...
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