Merrill Lynch to Get $6.6 Billion Tuesday, January 15, 2008 4:45 AM PST BY STEPHEN BERNARD
NEW YORK - Merrill Lynch & Co. said Tuesday that it is getting a cash infusion of $6.6 billion from three foreign investment funds.
The Korean Investment Corp., Kuwait Investment Authority and Mizuho Corporate Bank will receive a special class of stock for their combined $6.6 billion investment. All will be passive investors and none will have any rights of control.
Both the Korean and Kuwaiti investment groups are owned by the state governments. Mizuho is a Japanese investment bank.
Working with the foreign investors will allow Merrill Lynch to broaden its relationships and operations around the world, Merrill Lynch's new chairman and chief executive, John Thain, said in a statement.
The investors will receive a 9 percent dividend and their class of stock will be convertible to common shares in two years and nine months.
This is the second round of capital raising Merrill Lynch has announced in the past month. On Dec. 24, Merrill Lynch said it would sell a stake in itself of up to $5 billion to Singapore's state-run Temasek Holdings and an additional $1.2 billion stake to Davis Selected Advisers.
Merrill Lynch has been raising capital after losing billions of dollars on bad bets in the mortgage market. Rising delinquencies and defaults among mortgages have forced banks to write down the value of bonds and debt backed by the troubled loans, and look for new cash to boost balance sheets.
Merrill Lynch is scheduled to report its fourth-quarter earnings Thursday. It is widely expected the investment bank will post its second consecutive quarterly loss and take further write-downs, potentially exceeding the $7.9 billion taken in the third quarter.
Minutes after Merrill announced its new investors, Citigroup said it too would raise $12.5 billion from groups including the Kuwaiti authority and a Singapore state fund.