Merrill Lynch & Co is in talks with Chinese and Middle Eastern sovereign wealth funds that could lead to the sale of another big stake in the U.S. bank, British newspaper The Observer reported, citing sources in London and New York.
The Observer report, published this weekend, follows Merrill’s announcement last Monday it was shoring up its capital base by as much as $7.5 billion by selling up to $6.2 billion in shares to Singapore’s Temasek and asset manager Davis Selected Advisers.
New Chief Executive John Thain has been trying to bolster the company’s capital amid huge subprime mortgage losses.
“The multi-billion cash injection from Temasek was not enough and Thain is taking calls from a host of other potential saviors, which are understood to include sovereign fund investors from the Gulf and China,” the newspaper quoted a US observer as saying.
A source told the Observer: “Thain is desperately seeking an additional infusion of foreign capital to bolster Merrill’s balance sheet. It could be done by selling shares or other assets to raise cash.”
Analysts expect another large write-down for Merrill Lynch in the fourth quarter, with some estimating the hit will be bigger than the $8.4 billion write-down Merrill recorded in the third quarter.