On Monday this week, Merrill Lynch sold a $30.6 billion portfolio of mortgage debt for 22 cents on the dollar. The portfolio was sold to the Lone Star Funds, a Dallas-based investor.
The deal will make you shake your head and wonder what Senior Management at Merrill is thinking:
Lone Star paid $1.7 Billion and Merrill financed the rest of the deal. Effectively Merrill is still on the hook for for any losses in the portfolio beyond the downpayment made by Lone Star.
Merrill is raising additional capital ($8.5 Billion) by issuing new stock which will further dilute existing owner's stakes.
It has sold its stake in Bloomberg for $4.43 Billion - yet is receiving only $110 Million in cash and the balance in 10 and 15 year notes.
Are they simply changing the look of their Balance sheet, or really making significant changes for the better?
And they still bit the dust. Crazy times!
Ever heard of First Franklin? Branch of ML. They were up there with WAMU as the shadiest Subprime lenders out there. There is going to be a ridiculous boatload of 5/1 SISA (Stated Income Stated Assets) IO's (Interest Only) loans with 640 scores that will soon be hitting the market courtesy of ML's backing of Amnet back in the days of Liberty Flex.
Interesting move indeed.
Today it was reported that Merrill's chief executive is seeking a $10 Million bonus for 2008.
Is he insane?
Question is with what has and is happening with the other brokerage houses, "whose going to buy their stock...even in light of Buffet's encouragement?"