Post by jeffolie on Sept 14, 2007 12:00:16 GMT -6
Merrill lies.
Merrill mark to MAKE BELIEVE distorts losses.
Merrill Says Fair Value Adjustments Made for Subprime (Update3)
By Erik Schatzker
Sept. 14 (Bloomberg) -- Merrill Lynch & Co., the biggest underwriter of collateralized debt obligations, signaled that the subprime-mortgage crisis may hurt third-quarter earnings.
The New York-based firm said in a regulatory filing today that it made ``fair value adjustments'' for potential losses to date on holdings and financing commitments. Merrill fell $1.26, or 1.7 percent, to $73.88 in 11:56 a.m. composite trading on the New York Stock Exchange, making it the second-biggest decliner on the 12-member Amex Securities Broker/Dealer Index.
Analysts expect the five biggest U.S. securities firms will post losses on the declining value of subprime-mortgage and CDO holdings, as well as loan commitments to leveraged buyouts. Lehman Brothers Holdings Inc., the fourth-largest by market value, will be the first to report earnings, on Sept. 18, followed by Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos.
Merrill's disclosure ``puts pressure on everybody else'' to be ``very frontal about this,'' said Frederick Lane, chairman and chief executive officer of Boston-based investment bank Lane Berry & Co. ``It's not exactly news to people that there are balance sheet issues in these firms.''
Merrill, which reports next month, is at risk because it participates as an investor, lender, counterparty and guarantor in markets tied to subprime mortgages. They include structured credit products, such as CDOs, and leveraged loans, according to the filing.
`Significant Risk'
``Credit market conditions have continued to remain challenging in the third quarter,'' Merrill said in the filing, which the firm was required to make because of its pending purchase of First Republic Bank.
Merrill provided no estimate for how the changes in fair value will affect earnings. It said ``significant risk remains that could adversely impact these exposures and results of operations,'' reiterating disclosure from its quarterly report to the U.S. Securities and Exchange Commission last month.
How the securities industry will value holdings such as CDOs remains one of the biggest concerns for investors awaiting next week's earnings. Trading in some of the instruments has ceased because of the decline in demand for anything contaminated by subprime-mortgage defaults, which rose to a record earlier this year. As a result, prices are either unavailable or unreliable.
``Investors will be looking for transparency with respect to the manner in which brokers approach the mark-down process,'' Lehman Brothers analyst Roger Freeman wrote in an Aug. 30 report.
www.bloomberg.com/apps/news?pid=20601103&sid=aByjoRLyvJSU&refer=us
Merrill mark to MAKE BELIEVE distorts losses.
Merrill Says Fair Value Adjustments Made for Subprime (Update3)
By Erik Schatzker
Sept. 14 (Bloomberg) -- Merrill Lynch & Co., the biggest underwriter of collateralized debt obligations, signaled that the subprime-mortgage crisis may hurt third-quarter earnings.
The New York-based firm said in a regulatory filing today that it made ``fair value adjustments'' for potential losses to date on holdings and financing commitments. Merrill fell $1.26, or 1.7 percent, to $73.88 in 11:56 a.m. composite trading on the New York Stock Exchange, making it the second-biggest decliner on the 12-member Amex Securities Broker/Dealer Index.
Analysts expect the five biggest U.S. securities firms will post losses on the declining value of subprime-mortgage and CDO holdings, as well as loan commitments to leveraged buyouts. Lehman Brothers Holdings Inc., the fourth-largest by market value, will be the first to report earnings, on Sept. 18, followed by Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos.
Merrill's disclosure ``puts pressure on everybody else'' to be ``very frontal about this,'' said Frederick Lane, chairman and chief executive officer of Boston-based investment bank Lane Berry & Co. ``It's not exactly news to people that there are balance sheet issues in these firms.''
Merrill, which reports next month, is at risk because it participates as an investor, lender, counterparty and guarantor in markets tied to subprime mortgages. They include structured credit products, such as CDOs, and leveraged loans, according to the filing.
`Significant Risk'
``Credit market conditions have continued to remain challenging in the third quarter,'' Merrill said in the filing, which the firm was required to make because of its pending purchase of First Republic Bank.
Merrill provided no estimate for how the changes in fair value will affect earnings. It said ``significant risk remains that could adversely impact these exposures and results of operations,'' reiterating disclosure from its quarterly report to the U.S. Securities and Exchange Commission last month.
How the securities industry will value holdings such as CDOs remains one of the biggest concerns for investors awaiting next week's earnings. Trading in some of the instruments has ceased because of the decline in demand for anything contaminated by subprime-mortgage defaults, which rose to a record earlier this year. As a result, prices are either unavailable or unreliable.
``Investors will be looking for transparency with respect to the manner in which brokers approach the mark-down process,'' Lehman Brothers analyst Roger Freeman wrote in an Aug. 30 report.
www.bloomberg.com/apps/news?pid=20601103&sid=aByjoRLyvJSU&refer=us