On Monday this week, Merrill Lynch sold a $30.6 billion portfolio of mortgage debt for 22 cents on the dollar. The portfolio was sold to the Lone Star Funds, a Dallas-based investor.
The deal will make you shake your head and wonder what Senior Management at Merrill is thinking:
Lone Star paid $1.7 Billion and Merrill financed the rest of the deal. Effectively Merrill is still on the hook for for any losses in the portfolio beyond the downpayment made by Lone Star.
Merrill is raising additional capital ($8.5 Billion) by issuing new stock which will further dilute existing owner's stakes.
Merrill takes another decision that apparently makes no sense:
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