TOKYO (Reuters) - Merrill Lynch <MER.N> said on Tuesday that it would issue $6.6 billion in preferred shares to investors, including the Kuwait Investment Authority, as the subprime-hit bank continues to look overseas to boost its capital.
By David Dolan
TOKYO (Reuters) - Merrill Lynch <MER.N> said on Tuesday that it would issue $6.6 billion in preferred shares to investors, including the Kuwait Investment Authority, as the subprime-hit bank continues to look overseas to boost its capital.
Merrill, which is due to report earnings on Thursday, secured as much as $7.5 billion last month by selling a stake in itself to Singapore's government and an asset manager.
The latest deal would amount to about a 14 percent stake in the bank, based on its current market capitalization.
!ADVERTISEMENT!Merrill said it would also issue shares to the Korean Investment Corp and a unit of Mizuho Financial Group Inc <8411.T>, Japan's second-largest bank.
Merrill Chief Executive John Thain said in a statement that the deal would help shore up the company's capital base.
"These transactions make certain that Merrill Lynch is well-capitalized," Thain said. He also said the investment would increase the bank's strategic opportunities overseas.
The stock has a reference price of $52.40 and a maturity of 2 3/4 years. It will pay a yearly dividend of 9 percent.
Merrill also said the stock would have a lock-up period of one year, where investors would not be permitted to sell, transfer or hedge it, directly or indirectly.
TABLES TURNED
The deal also underscores the growing importance of Asian financial institutions.
"How the times have changed. It's a mere five years since Merrill was investing in Mizuho," said David Threadgold, a banking analyst at Fox-Pitt, Kelton, in Tokyo.
"The people with money are the people who haven't been dragged down themselves by the subprime," Threadgold said. "And those tend to be sovereign funds and Asian financial institutions."
Merrill is likely to see losses of around $15 billion on its subprime-related investments, almost twice its original estimate, The New York Times said on Friday.
In October, the company booked a third-quarter net loss of $2.3 billion on subprime investments.
By contrast, Tokyo's big banks have avoided the worst of the credit crisis, due to smaller investments in subprime-related products.
Mizuho has about $7.4 billion invested in products related to residential mortgage-backed securities, with $982 million of that exposed to subprime mortgages.
(Editing by Lisa Von Ahn)
