With the probability that things are going to get worse before they get better, along with the likelyhood there are billions more in write-downs facing them in the fourth quarter, Merrill Lynch (MER) is in negotitations with Temasek Holdings Pte. Ltd. - a sovereign wealth fund from Singapore - to receive a cash infusion of around $5 billion, said the online Wall Street Journal, citing someone close to the situation.
Temasek had around $110 billion in assets at the beginning of April, has been around longer than the majority of state-owned investment companies, and is among the more prominent of them. The fund was launched in Singapore in 1974.
Talks between the two are reportedly in the advance stage, although there are some hurdles to overcome before it is a done deal; specifically how the deal will be structured, when the funds are needed, and regulatory concerns.
On Temasek's side, their board has evidently given approval based on working out the above mentioned issues.
Some analysts are saying it's possible that Merrill could end up writing down up to $8 billion more in mortgages in the fourth quarter. That would bring them up to $15.9 billion in write-downs just in the second half of 2007 alone. If that does happen, it would make Merrill Lynch the unfortunate leader in losses related to write-offs.
It has to be assumed that Merrill is in negotiations with other funds and countries as well, with the possibility that no deal will come to fruition with this effort. Another reason could be that they may need more than the $5 billion being potentially worked out with Temasek.
This underscores the reality that the subprime mortgage related problems are far from over.
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