| Merrill Lynch & Co To Lose 50 Cents Per Share For Their 3rd Quater |  |
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| Friday, 05 October 2007 | |
Merrill Lynch & Co Says That It Will See A 50 Cents Loss for the 3rd QuarterLOS ANGELES, CA, (NAMC) - On Friday morning Merrill Lynch & Co., Inc. (NYSE: MER) made an announcement that due to the credit crunch and current credit conditions that the company's earnings may be adversely affected to the tune of 50 cents per diluted share for their 3rd quarter. According to Merrill the loss is a result of significant negative mark-to-market adjustments to its positions in two specific asset classes: collateralized debt obligations (CDOs) and sub-prime mortgages; and leveraged finance commitments. It seems that Merrill is taking a page out of the other financial institutions playbook such as Citigroup, UBS and Deutche Bank by preannouncing their bad news in an effort to soften the blow. This is additional information from the announcement:
Write-downs of an estimated $4.5 billion, net of hedges, related to incremental third quarter market impact on the value of CDOs and sub-prime mortgages. These valuation adjustments reflect in part significant dislocations in the highest-rated tranches of these securities which were affected by an unprecedented move in credit spreads and a lack of market liquidity in these securities, which intensified during the third quarter. During the quarter, the company significantly reduced its overall exposure to these asset classes.
Write-downs of an estimated $967 million on a gross basis, and $463 million net of related underwriting fees, related to all corporate and financial sponsor, non-investment grade lending commitments, regardless of the expected timing of funding or closing. These commitments totaled $31 billion at the end of the third quarter of 2007, a net reduction of 42% from $53 billion at the end of the second quarter. The net losses related to these commitments were limited through aggressive and effective risk management, including disciplined and selective underwriting and exposure reductions through syndication, sales and transaction restructurings.
Today will show whether their strategy will pay off. David Kingston
NAMC Newswire Note: NAMC Worldwide provides Investment Banking consulting services to both publicly traded and privately held companies, everything from capital raising to mergers and acquisitions. Other areas of focus are Private Equity Capital Raising and Private Commodity Transactions.
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