Facing a fourth-quarter writedown of an estimated $8 billion in subprime paper, Merrill Lynch is negotiating with Singapore’s state-owned investment fund Temasek Holdings for a $5-billion cash infusion, the Wall Street Journal reports. If the deal goes through, Merrill would join several other Western financial institutions bailed out by Asian or Mideastern governments since November.
Morgan Stanley, UBS and Citigroup have all announced deals with foreign investors for bailouts, but none have seen the scope of losses projected at Merrill, which took $7.9 billion in mortgage write-downs in the third-quarter. A Credit Suisse Group analyst said the fourth-quarter writedown at Merrill, in a worst-case scenario, could run as high as $12 billion to $15 billion. Merrill’s stock has fallen 41% since June.