Citi: Merrill May Writedown $6B, Sell Stakes In Bloomberg And Some Of BlackRock

July 7, 2008 1:41 p.m. EST

New York, NY (AHN) - Merrill Lynch & Co. is likely to writedown as much as $3.95 a share or $6 billion as second-quarter losses related to high-grade collateralized debt obligations, Citigroup Inc. said.

The New York-based third-largest U.S. securities firm plans to release second quarter 2008 results on July 17.

Merrill Lynch is likely to raise capital of about $5 billion by selling its 20 percent in Bloomberg LP, which is the parent company of Bloomberg News.

It may also sell its stake in New York-based money manager BlackRock Inc. by raising up to $2 billion and another $1 billion by slashing down its dividends, Citigroup analysts said.

The firm has a 49 percent stake in BlackRock, which the market analysts estimate its worth to be at $20 billion. But Merrill will maintain majority of its stake in the company to maintain a strategic alliance with BlackRock.

The reports said that the firm cannot sell part of its interest in BlackRock before Sept. 29, 2009, but it can acquire a permission do so.

According to Citigroup analyst Prashant Bhatia in a report published yesterday, Merrill Lynch has raised more than $15 billion in capital, which is higher than its net losses over the past six quarters.

The brokerage firm has Merrill's stock rating on "buy", while slashed his price estimate on the firm's stock to $65 from $75.

Shares of the firm plunged by 3.6 percent or $1.12 to $30.00 in New York Stock Exchange composite trading during afternoon trading session on Monday.