Merrill hires ex-executive Kronthal to sort subprime woes
By Tim McLaughlin
NEW YORK (Reuters) - Merrill Lynch & Co Inc <MER.N> has rehired Jeffrey Kronthal, a fixed-income executive who left the company last year, to help sort through its subprime mortgage problems, the brokerage told employees on Monday.
Merrill Lynch co-President Greg Fleming told employees in a letter that Kronthal had been hired as a consultant to advise on subprime and other mortgage-related portfolios, according to a copy of the memo obtained by Reuters. Kronthal and other executives left Merrill in the summer of 2006 amid a shake-up in the company's fixed-income operations.
Some current and former company executives have told Reuters in recent months that they believed Merrill could have avoided some of its subprime pain had Kronthal and other fixed-income veterans not left the company when they did.
Merrill Lynch faces huge potential write-downs on assets underpinned by risky subprime mortgages. The company's $8.4 billion write-down in the third quarter cost Chairman and Chief Executive Stan O'Neal his job, leaving new Merrill leader John Thain with the task of cleaning up.
Analysts estimate Merrill could further slash the value of these subprime-related assets by an additional several billion dollars. Last month, the company said its total exposure to subprime mortgages and collateralized debt obligations was $27.2 billion.
Fleming said in the letter that one of Kronthal's main responsibilities will be to focus on Merrill Lynch's subprime mortgage and CDO inventories. Kronthal's role is expected to be a transitional one.
Kronthal will be assisting David Sobotka, Merrill's new global chief of fixed-income, currencies and commodities. Sobotka got that job in October when his predecessor, Osman Semerci, was ousted amid the first wave of subprime-related write-downs at Merrill.
Kronthal left Merrill in July 2006 when Semerci was promoted.
During his tenure at Merrill, which started in 1989, Kronthal ran a number of fixed-income businesses, including asset-backed finance, mortgages and CDOs.
"Jeff's deep experience in structured securities, credit and risk, and his long history with and knowledge of the company make him an especially valuable resource at this time for Merrill Lynch," Fleming said in his letter.
(Reporting by Tim McLaughlin; Editing by Andre Grenon, Gary Hill)