SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Politics : Welcome to Slider's Dugout
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: ecrire who wrote (10988)7/29/2008 8:55:36 PM
From: bluezuu   of 50011
 
Anyone studied the Merrill Lynch capitalization plan announced today?. One item that stands out is that they themselves are supplying most of the financing for the purchase of their CDO's by Lone Star..selling those CDO's, notional value over $30 billion for $6+ billion.

Barry Ritholtz looked at it and posted the below.

------------------

Let's take this apart:

• Merrill appears to be moving $30.6 billion dollars of bad paper off of their books.

• This paper was carried at a value of $11.1, meaning there was almost $20B in prior related write downs.

• After this transaction, Merrill’s ABS CDO exposure in theory drops from $19.9 billion to $8.8 billion (hence, the $11.1B number).

• The $6.7B purchase price relative to the $30.6B notational value is 21.8% on the dollar

However:

• Merrill is providing 75% of the financing –- and MER’s only recourse in the event of default is to retake the CDO paper back from the buyer.

• While Merrill hopes to be made whole, the reality is they still have potential exposure to these ABS CDOs via the financing;

• Actual sale price = 5.47% on the dollar

Less than five and half cents on the dollar? That's an even cheaper sale than originally advertised.

What this transaction actually accomplishes is getting the paper -- but not the full liability -- off of Merrill's books.

How very Enron-like !

bigpicture.typepad.com
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News