Merrill seeks funds from a foreign government
Investment bank, Merrill Lynch, is looking to repair its balance sheet after $8.4 billion of write-downs on mortgage related investments and corporate loans.
It is set to become the latest Wall Street bank to seek funds from Singapore’s wealthy government fund, Temasek Holdings. It is believed that Temasek’s board had provisionally approved injecting money into Merrill.
The move follows similar injections of Middle Eastern and Asian money into Citigroup, Morgan Stanley and UBS.
Citigroup raised $7.5 billion by selling convertible stock to Abu Dhabi’s state-backed investment authority. Morgan Stanley secured $5 billion from the China Investment Corporation and Bear Stearns formed a $2 billion alliance with China’s Citic Securities, while UBS raised $9.5 billion from funds in Singapore and the Middle East.
With a portfolio of over 160 billion Singapore dollars (£55 billion), Temasek is among Asia’s richest sovereign funds. It controls Singapore Airlines and Singapore Telecoms, owns a 13% stake in Standard Chartered Bank and bought 2% of Barclays in early 2007.
Sovereign wealth funds are overflowing with cash due to China’s huge trade surplus and record oil prices.
Chief executive Stan O’Neal departed Merrill in October and was replaced by John Thain, former New York Stock Exchange chief. Analysts believe Mr Thain will report a further $8.6 billion write-down for the fourth quarter.