Merrill Lynch to raise investment to cover subprime loses

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Merrill Lynch has enhanced its capital position by reaching agreements with two investors to raise up to $6.2 billion of newly issued common stock in a private placement, announced the company on its website on Monday.

The agreements, with Temasek Holdings and Davis Selected Advisors, were the latest success of Merrill Lynch’s efforts to raise capital to cover its huge losses suffered in the US subprime mortgage crisis. According to the agreements, Temasek Holdings will invest $4.4 billion in Merrill Lynch common stock and has the option to purchase an additional $600 million of Merrill Lynch common stock by March 28, 2008. Davis Selected Advisors will make a long-term investment of $1.2 billion in common equity. These transactions are expected to close by mid-January, said Merrill Lynch, one of the Wall Street’s biggest investment banks. „The benefits of these transactions are not limited to strengthening our financial position (as) we also see significant benefits from partnering with Temasek Holdings given its sizable investment across Asia, particularly in Singapore, China and India,” said John A. Thain, chairman and CEO of Merrill Lynch.

Calling Temasek Holdings and Davis Selected Advisors „savvy investors with proven track records of achieving strong investment returns,” Thain hoped the investment will enhance his company’s ability to „drive new growth opportunities around the world.” Temasek Holdings is an Asia investment house headquartered in Singapore. And Davis Selected Advisors is an independent investment advisor which currently manages equity assets of more than $100 billion through a number of funds. (people.com.cn)

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