CJR's Dean Starkman summarizes a great piece in the WSJ.
Merril Lynch is selling off $30 Billion worth of CDOs to a private equity firm - and taking a 78% loss.
Of around 30 CDOs totaling $32 billion that Merrill underwrote in 2007, 27 have seen their top triple-A ratings downgraded to “junk,” according to data compiled by Janet Tavakoli, a structured-finance consultant in Chicago.What a difference a year makes.
"What has become increasingly clear over the past year is the longer you wait, the less the soured assets are worth," [Oppenheimer analyst Meredith Whitney] said. "[Merrill CEO] John Thain is cutting his losses."Amputate or bleed to death. Easy choice, I guess.
Late edit:
The deal is even worse than it appears. Merril loaned the private equity firm 75% of the needed funds to buy the CDOs. NYT has the details. (H/t AUL)
2 comments:
Check the fine print. ML seems to be getting 22% on the dollar until you learn that they are loaning 75% of the purchase price. So, they are really getting less than 6%. This is most likely a lame ploy to get the debt off the books. If the CDO's are really bad the buyer will surely default.
Wow.
If they're making that kind of a deal - the CDOs must really be lousy.
Here, take my CDOs - I'll loan you the money you need to buy them sounds mighty desperate.
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