Merrill shares fall as credibility questioned

[EV_Ares]

Fri Nov 2, 2007 10:55am ET
Market View
MER (Merrill Lynch & Co Inc )
Last: $56.99
Change: -5.20 (-8.36%)
Revenue (ttm): $77,946.0M
EPS: 3.96
Market Cap: $56,080.02M
Time: 10:45am ET


NEW YORK (Reuters) - Merrill Lynch & Co Inc's credibility is coming under increased attack after an analyst said the biggest brokerage sought to mitigate write-downs by parking subprime-related assets with hedge funds.

Shares of Merrill (MER.N: Quote, Profile , Research), which ousted Chief Executive Stan O'Neal earlier this week, sank to a two-year low on Friday, falling 9.3 percent to $56.44 in trading on the New York Stock Exchange. Shares are down 38 percent this year.

Friday's decline came after the Wall Street Journal reported that the brokerage may have used deals with hedge funds to delay losses on billions of dollars in troubled assets.


Scott Berman, a hedge fund lawyer for Friedman Kaplan Seiler & Adelman, said the purpose of such a move would be to clean up a company's balance sheet. He said he is not aware of any transaction involving Merrill.

"I don't know whether it is legal, but it certainly smells fishy," Berman said. "If I were a Merrill shareholder, I wouldn't be happy about it."

Merrill was not available for comment.

Janet Tavakoli, a structured finance analyst, said in a note last week that Merrill had asked hedge funds to take its troubled assets for a year in an off-balance sheet credit facility. The effect of such a deal would reduce Merrill exposure to collateralized debt obligations, but only temporarily. Continued...

Link: http://today.reuters.com/news/articleinvesting.aspx?type=hotStocksNews&storyID=2007-11-02T145518Z_01_N02541463_RTRUKOC_0_US-MERRILLLYNCH-DISCLOSURE.xml

[flashl]

1. Its getting harder to keep the subprime mess swept under the rug? n/t

[EV_Ares]

2. Yeah and get this; they are saying the next shoe to drop is the insurance

bond business. This thing is like some scary monster that they cannot keep hiding or locked up.