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July 29 (Bloomberg) -- Merrill Lynch & Co. took the biggest step toward recovering from the worst financial disaster in its 94-year history by acknowledging that $30.6 billion of its holdings are worth barely a fifth of their original price and securing new capital amounting to a third of its market value.
Merrill liquidated more than half of the mortgage-linked securities that have saddled the company with $27 billion of writedowns since the beginning of 2007. To cushion the loss on the asset disposal, the firm raised $8.55 billion today by selling new shares for $22.50 each, 60 percent less than Merrill's stock price at the beginning of the year.
Quote
Almost $19 billion of net losses in the past year forced Chief Executive Officer John Thain to backtrack on assurances that the firm had enough capital to weather the credit crisis. Since taking the post in December, Thain has raised $30 billion in an effort to keep pace with mounting charges on mortgage bonds amassed by his predecessor, Stan O'Neal. Standard & Poor's cut the firm's debt rating last month and signaled that more downgrades were possible.
Beyond Zero
Thain "s trying to control the mess that he inherited,'' Scott Rothbort, president of Lakeview Asset Management LLC, said in a Bloomberg Television interview. "I would not rule out at this point their having to write down even more, but you can't write things down beyond zero."
