Merrill Lynch to Raise $1.2 Billion From Mizuho, People Say

Merrill Lynch to Raise $1.2 Billion From Mizuho, People Say

Jan. 15 (Bloomberg) -- Merrill Lynch & Co., the U.S. brokerage battered by subprime mortgage losses, may raise about $1.2 billion by selling preferred shares to Mizuho Financial Group Inc., people with knowledge of the matter said.

Mizuho is in talks about buying a portion of the preferred shares Merrill plans to sell, the two people said, declining to be identified as the discussions are private. The shares will be convertible into common stock in Merrill, they said.

Merrill is seeking capital after $8.4 billion of writedowns on U.S. mortgage investments led to the biggest loss in its 93- year history in the third quarter. Tokyo-based Mizuho would become the first Japanese company in more than two decades to make a major investment in a Wall Street firm.

``The financing could help Merrill restore some of the confidence it has lost,'' said Shinichi Tamura, a banking analyst at UBS Securities Japan Ltd. ``Mizuho would likely be a silent, passive investor and wouldn't make too much noise.''

The Nikkei newspaper earlier reported the possible investment in Merrill by Mizuho, Japan's second-largest bank, without saying where it got the information. Mizuho's Tokyo based-spokeswoman Masako Shiono declined to comment, as did Merrill spokesman Tsukasa Noda.

Merrill has gained 16 percent in New York trading since touching a three-year low on Jan. 8, on optimism that a second round of financing may help it weather the credit market turmoil that forced the firm to raise $6.2 billion from Singapore's Temasek Holdings Pte and Davis Selected Advisors LP in December.

Industry Woes

Chief Executive Officer John Thain, who took over Dec. 1, joined Citigroup Inc., Morgan Stanley and UBS AG in tapping overseas investors to shore up capital. U.S. and European banks and securities firms have turned to Asian and Middle Eastern governments and investors for about $34 billion of fresh funds.

The world's biggest financial institutions have announced about $100 billion in writedowns and loan losses sparked by the U.S. subprime mortgage slump, eroding their balance sheets and sending shares plunging.

Merrill probably will post a loss of $3.23 billion on Jan. 17, topping the record $2.24 billion shortfall reported in the third quarter, Stan O'Neal's last as CEO, analysts estimate.

The firm may write down $15 billion related to U.S. mortgage losses, almost twice its original forecast, the New York Times reported Jan. 11, citing unidentified people briefed on the plan. Merrill is trying to raise $4 billion from investors in the U.S., Asia and the Middle East to shore up its finances, the Times said, citing the same people.

Citigroup, the biggest U.S. bank, plans to more than 20,000 jobs, slash its quarterly dividend and collect at least $10 billion in cash from outside investors, the Wall Street Journal reported, citing unidentified people familiar with the matter.

Sumitomo Bank Ltd. a predecessor of Tokyo-based Sumitomo Mitsui Financial Group Inc., paid $500 million for a 12.5 percent stake in Goldman Sachs Group Inc. in 1986, later selling out.

Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.

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