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21 May 2024

Merrill may get $5bn from Singapore’s Temasek

By Agencies

Merrill Lynch & Co Inc. may get up to $5 billion in a capital infusion from Singapore state investor Temasek Holdings, the Wall Street Journal reported on Thursday.

Temasek is in advanced talks with the largest US brokerage and its board has given preliminary approval for the investment, the Journal reported, citing a person familiar with the matter.

However, pricing, timing and regulatory issues would still need to be negotiated between the two companies, the Journal said.

A Merrill spokeswoman could not be immediately reached for comment. In Singapore, Temasek spokesman Mark Lee said: "Like we told the Wall Street Journal, we decline comment."

Merrill Lynch faces huge potential write-downs on assets underpinned by risky subprime mortgages. The company's $8.4 billion write-down in the third quarter cost Chairman and Chief Executive Stan O'Neal his job, leaving new Merrill leader John Thain with the task of cleaning up.

Analysts estimate Merrill could further slash the value of these subprime-related assets by an additional several billion dollars. Last month, the company said its total exposure to subprime mortgages and collateralized debt obligations was $27.2 billion.

A Temasek capital infusion into Merrill would be the latest in a series by sovereign wealth funds into western banks hurt by this year's credit crunch.

Earlier this week, China Investment Corp agreed to pump $5 billion into Morgan Stanley as the US investment bank posted a fourth-quarter loss fuelled by $9.4 billion of losses in subprime mortgages and other assets.

Citigroup Inc. agreed last month to sell a 4.9 per cent stake to Abu Dhabi for $7.5 billion, while UBS accepted a $9.75 billion investment from the Government of Singapore Investment Corporation. (REUTERS)