Merrill Lynch seeks cash infusion

The firm will sell a $5 billion stake to a Singapore company and the bulk of its commercial finance arm.

Merrill Lynch has agreed to sell a $5 billion stake to a Singapore-based investor.
Temasek Holdings, a company that represents the Singaporean government’s investment interests, will invest $4.4 billion in the Wall Street firm’s stock and will have the opportunity to buy $600 million more of it by March 28.
Davis Selected Advisers, a Tucson-based investor, will purchase an additional $1.2 billion stake in Merrill.
Together, both firms will have less than 10% ownership of Merrill.
In another search for capital, Merrill Lynch announced that it would sell the bulk of Merrill Lynch Capital, its commercial finance arm, to General Electric Capital, adding more than $15 billion in commitments to GE’s base. The Norwalk, Conn.-based GE Capital will acquire the group’s corporate finance, equipment finance, franchise, energy and healthcare finance units.
The deal is expected to close in the third quarter, and should free up $1.3 billion in capital for Merrill’s business, John Thain, CEO and chairman, said in a statement. Financial details are undisclosed.
The Norwalk, Conn.-based GE Capital will acquire the group’s corporate finance, equipment finance, franchise, energy and healthcare finance units.
The deal is expected to close in the third quarter, and should free up $1.3 billion in capital for Merrill’s business, John Thain, CEO and chairman, said in a statement. Financial details are undisclosed.
The extra cash coming in from the purchases are supposed to help cushion the blow Merrill will take following writedowns: Meredith Whitney, an analyst for CIBC World Markets, expects a $7 billion writedown from the New York-based firm because of its subprime mortgage exposure, according to the Associated Press. She also forecasted a loss of $2.70 per share for the fourth quarter.
The firm has already taken an $8 billion writedown during the third quarter thanks to the falling value of mortgage-backed debt.

Ms. Whitney also said that Merrill’s new investments are a step forward in fixing the firm’s problems, the AP reported.