- Super Senior CDO positions worth $30.6bn sold to Lone Star for $6.7bn
- … 22 cents on the dollar.
- … a further $4.4bn writedown from the mark Merrill reported barely two weeks ago, when they were valued at $11.1bn, or 36 cents on the dollar.
- Loan Star purchasing the CDOs using a $5bn loan from Merrill
- Writedowns on hedges with monolines too: cancellation of contracts with XL/SCA leading to $528m net loss in Q3
- Total Q3 writedown of $5.7bn expected.
But…The sale only gets rid of just over half Merrill’s super senior CDO position (as valued, end Q2).
On a pro forma basis, this sale will reduce Merrill Lynch’s aggregate U.S. super senior ABS CDO long exposures from $19.9 billion at June 27, 2008, to $8.8 billion, the majority of which comprises older vintage collateral – 2005 and earlier. The pro forma $8.8 billion super senior long exposure is hedged with an aggregate of $7.2 billion of short exposure, of which $6.0 billion are with highly-rated non-monoline counterparties, of which virtually all have strong collateral servicing agreements, and $1.1 billion are with MBIA. The remaining net exposure will be $1.6 billion.
Related links
The Merrill Lynch announcement
Merrill’s Q2s worse than expected – FT Alphaville
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