Merrill to Bear: Drop Dead

While it is unlikely we have heard the end of this story, it appears Merrill has better things to do than prop up the faltering market for sub-prime paper.  Maybe they had enough time to reduce their exposure.

Mark this to market:

Merrill has indicated plans to sell off at least $850 million worth of collateral assets, mostly mortgage-related securities, Wednesday afternoon, according to documents reviewed by the Wall Street Journal. Those plans come amid efforts by the Bear fund managers to stave off liquidation by lining up $1.5 billion in new credit from parent company Bear Stearns and an additional $500 million in new equity capital. The managers spent Tuesday trying to finalize those financing arrangements.

An auction Wednesday could come as a blow to the fund, known as the High-Grade Structured Credit Strategies Enhanced Leverage Fund, because it could spur additional sales of collateral assets from other worried dealers. A string of asset seizures would likely force the dissolution of the fund, and could effectively drag down the prices of similar securities in the market, creating losses at other Wall Street firms. On the other hand, a handful of successful trades might still pull the troubled fund out of harm’s way, and Merrill could yet change its plans, as it has done once before. 

Will Merrill will blink? Maybe Blackstone will ride to the rescue. And if if seems like you have seen this picture before, you probably have.

In late September 1998, the New York Federal Reserve Bank invited a number of major Wall Street investment banks to enter a consortium to fund the multibillion-dollar bailout of a troubled hedge fund. No sooner was the $3.6-billion plan announced than questions arose about why usually independent banks would band together to save a single privately held fund. The short answer is that the banks feared that the fund’s collapse could destabilize the entire stock market. When Genius Failed

Same shit, different year? Not quite. But still we gotta say…

Say it ain’t so, Stan

Merrill to Dump Bear Fund’s Assets
Wall Street Journal
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in securities mentioned

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