Is Merrill Lynch Throwing in the Towel on CDOs?
From a press release yesterday from Merrill Lynch (MER)… On July 28, 2008, Merrill Lynch agreed to sell $30.6 billion gross notional amount of U.S. super senior ABS CDOs to an affiliate of Lone Star Funds for a purchase price of $6.7 billion. At the end of the second quarter of 2008, these CDOs were carried at $11.1 billion One consistently echoed sentiment the last several months is that financial institutions need to deleverage and get their losses out of the way before some light can be seen at the end of the tunnel. Selling these CDO assets at 60% of carrying value is a step in the right direction – and it offers a great proxy to see which of the banks out there might have more writedowns to bring to light. While 20% of original notional value is an enormous hit to take on the bottom line, that’s the kind of discount – and this is the kind of sizable deal – that shows where the buyers are. As with most markets, there is liquidity; the major caveat is that the liquidity is a functio
