Merrill Lynch jettisons CDO biz

The firm plans to stop underwriting collateralized debt obligations and other structured credit products.

Merrill Lynch & Co. Inc. plans to exit the business of underwriting collateralized debt obligations and other structured credit products, according to Bloomberg.
“We are not going to be in the CDO and structured-credit types of businesses,” said Merrill chief executive John Thain, who was speaking at the Citigroup Financial Services Conference in New York, according to the report.
Earlier this month, Merrill took a fourth-quarter net loss of $9.83 billion, or $12.01 per share, as losses in the fixed-income led the company to record a $16.7 billion write-down due to the ongoing fallout from the subprime debacle (InvestmentNews, Jan. 17).
The New York-based bank was the largest underwriter of CDOs between 2004 and 2006, and got stuck with some of the products as investor demand fell, according to the report.
The market for CDOs, which repackage assets into new securities with varying degrees or risk, has been frozen since last July when two Bear Stearns Cos. funds that invested in them imploded.