U.K. Merrill unit records mammoth losses

The $29 billion in losses reduces the likelihood that the firm will have to pay British taxes in coming years.

A U.K. division of Merrill Lynch & Co. Inc. has recorded $29 billion in losses from subprime mortgages and collateralized debt, reducing the likelihood that the firm will have to pay British taxes in coming years.
Merrill Lynch International Ltd. of London recorded most of the losses this year, including $5 billion from the sale of $30.6 billion in collateralized debt obligations, the New York-based company said in a filing with the Securities and Exchange Commission.
At the current U.K. corporate tax rate of 28%, the bank will be able to offset losses against future profits, lowering its future British tax bill by as much as $8 billion, according to the Financial Times.
Merrill Lynch International paid $130 million in corporate tax in 2006.
If the unit continues to generate profits at that year’s levels, it will be exempt from U.K. corporate tax for 60 years.
The U.K. losses involve the July 28 sale of $30.6 billion of U.S. supersenior CDOs to a unit of Dallas-based Lone Star Funds for $6.7 billion, according to the SEC filing.
A call to Merrill Lynch was not returned.