Merrill May Write Down $4.5 Billion on Assets, Bernstein Says

Merrill May Write Down $4.5 Billion on Assets, Bernstein Says

March 27 (Bloomberg) -- Merrill Lynch & Co. may write down $4.5 billion on collateralized debt obligations and post a first- quarter loss, according to Sanford C. Bernstein & Co.

Merrill had about $30.4 billion in collateralized debt obligations on its balance sheet at the end of 2007, the most among its peers, analysts led by Brad Hintz in New York wrote today in a note to clients. The value of the CDOs fell sharply in March, which was a ``poor'' month for fixed income businesses and asset valuations, Hintz said.

``We believe the biggest swing factor for Merrill's first- quarter 2008 results will be the severity of the writedowns,'' Hintz said. ``It will take at least several years for Merrill to fully divest itself of these troubled assets,'' amid tougher borrowing conditions and the slowdown in the CDO market, said Hintz, who rates the stock ``market-perform.''

Bernstein cut Merrill's first-quarter earnings estimate to a loss of $1.60 per share, from an earlier estimate of a $1.30 profit. As a result of the drop, Bernstein estimates the New York-based bank will earn $1.18 per share in 2008, compared with a previous estimate of $4.10, Hintz wrote.

BLOOMBERG