MarketWatch
January 15, 2008
By Aude Lagorce
LONDON (MarketWatch) -- Merrill Lynch & Co. on Tuesday said it has received a $6.6 billion cash injection from several investors, notably three from the Middle East and Asia.
The Wall Street powerhouse whose capital position has been weakened by heavy subprime-related write-downs in recent months, said it would issue preferred stock to "long-term investors," with the bulk being taken up by Kuwait Investment Authority, Japan's Mizuho Corporate Bank (MFG) and Korean Investment Corp.
n addition, TPG-Axon Capital, the New Jersey Division of Investment, Olayan Group and T Rowe Price Associates (TROW) acquired on behalf of various clients a few hundred million dollars worth of shares.
The preferred stock will pay a 9% annual dividend and will be convertible to common stock in two years and nine months.
The company said the investors will be "passive" and have no rights of control or role in governance.
However, the move, which marked the second time that Merrill has raised capital in the past month, shows the extent to which Wall Street banks have become dependent on Asia and the Middle East to shore up their balance sheets.
On Dec. 24, Merrill said it would sell a stake of up to $5 billion to Singapore's state-run Temasek Holdings and an additional $1.2 billion stake to U.S.-based Davis Selected Advisers.
Also late last year, Merrill sold its insurance unit to Aegon (AEG) for $1.25 billion in cash.
Shares of Merrill, which reports fourth-quarter financial results on Thursday, fell 2.2% in morning trading in New York, to $54.75.
Merrill wasn't the only Wall Street bank raising money on Tuesday: Citigroup Inc. (C) aid it has received more than $12 billion in new capital from a private placement of preferred shares to investors including former CEO Sandy Weill, Saudi Prince Alwaleed bin Talal, Singapore's government and the state of New Jersey.
The additional funding came as the bank unveiled its first quarterly loss since 1998 and slashed its dividend. Read more about Citi's results.
Merrill Chief Executive John Thain, who assumed the top position in November, said he was pleased his efforts to improve the bank's balance sheet were paying off.
"One of my main priorities over the last several weeks has been to ensure Merrill Lynch's balance sheet is strong, and these transactions make certain that Merrill Lynch is well-capitalized," he said in a statement.
Thain added that through its collaboration with these long-term foreign investors, Merrill may benefit from more strategic opportunities around the world. In particular, he noted that Merrill would gain access to networks of clients in the Middle East and Asia.
Source: MarketWatch
Merrill lines up fresh $6.6 billion capital injection
