"Merrill reports $2.083 bln hedge fund exposure"
Thursday October 1, 5:49 pm Eastern Time
Merrill reports $2.083 bln hedge fund exposure
NEW YORK, Oct 1 (Reuters) - U.S. financial services giant Merrill Lynch and Co.
Inc. (NYSE:MER - news) said on Thursday its exposure to hedge funds, including
troubled Long-Term Capital Management, was $2.083 billion, with overall net
exposure at $84 million.
Merrill, which is involved in a $3.6 billion bail-out of Long-Term Capital, said in a statement it holds $1.999 billion of
collateral -- mostly cash, U.S. Treasuries and U.S. agency securities -- in its accounts against the exposure. Among hedge
funds, Merrill said it had the most exposure to Long-Term Capital, at $1.4 billion. This amount is fully collateralized.
Banks and brokers are slowly revealing the extent of money they lent hedge funds after the near-demise of Long-Term
Capital Managment, a once high-flying hedge fund that lost huge sums through ill-timed bets in global bond and stock
markets.
Chase Manhattan Corp. (NYSE:CMB - news) was the first U.S. bank to reveal its outstanding loans to hedge funds, at
$3.2 billion, and Bankers Trust Corp. (NYSE:BT - news) said on Thursday hedge funds owed it a total of about $875
million.
Both Chase Manhattan and Bankers Trust are also part of a consortium of 14 leading financial companies coughing up
money to keep Long-Term Capital afloat.
Merrill said its exposure to all hedge funds other than Long-Term Capital was about $700 million and was broadly
diversified. The company's second-largest hedge fund exposure was less than 15 percent of its exposure to Long-Term
Capital, it said, declining to name other funds.
Merrill said the remaining balance of its equity investment in Long-Term Capital, before this week's recapitalization, was
less than $2 million and that amount had been fully reserved.
Merrill was an early investor in Long-Term Capital, contributing $15 million at the fund's inception in 1994 and a total of
123 top executives, including Chairman David Komansky, invested about $22 million of their own money in the fund.
Komansky, Merrill President Herb Allison and Vice Chairman John Steffens were scheduled to hold an internal
conference call with employees at 1615 EST/2015 GMT on the firm's ties to Long-Term Capital and other hedge funds.
Merrill also said in the statement its exposure was a typical amount and was well within its established credit limits with
respect to each individual hedge fund client. The exposure figures are on mark-to-market basis.
The company said it ''closely manages its hedge fund relationships, including its counterparties, specific transactions,
mark-to-market exposures and the quality and liquidity of collateral.''
(http://biz.yahoo.com/rf/981001/bj1.html) |
