Merrill Pushing Bad Debt for Petty Prices
Friday, September 5, 2008 : PermalinkNew York (HedgeCo.Net) – Merrill Lynch is still hoping to strike a deal in which Korea Asset Management Corp. would purchase a significant amount of their bad debt. Talks have been stagnant because of recent disputes over prices, but some say those debts could sell for under $200 million.
"We have been seeking to buy a significant amount, but a deal may be difficult at this rate,” said Lee Chol Hwi, head of Korea Asset, in an interview with Bloomberg.
Merrill, like other large financial institutions that have been pummeled by subprime related losses, is trying to raise capital to overcome the $40 billion plus of losses they have had to write down. Merrill recently had to get rid of about $31 billion of collateralized debt obligations, another form of mortgage backed securities, for about 22 cents on the dollar.
Korea Asset, which was created in 1962 and aims to purchase delinquent loans, set up a $870 million fund that buys bad debts in the United States. Lee says the company can afford to be patient, since he feels the turmoil in the marketplace is only going to push prices lower.
"The U.S. market desperately needs capital,” Lee said. "It’s practically a buyer’s market there.”
Shares of Merrill are trading for almost 66% less of what they were a year ago. Financial institutions have written down over $500 billion in losses stemming from the credit crunch. Merrill leads the pack along with Citigroup of those that have been hit the hardest, with the banks writing down $51 billion and $55 billion respectively.
Julie Scuderi
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