Merrill Lynch could take an additional $8.6 billion write-down in the fourth quarter on subprime-related debt, an analyst said yesterday, adding further pain to the Wall Street icon run by newly installed chief John Thain.
In an effort to get more capital, the firm is in talks with to Temasek Holdings Pte. Ltd., a Singapore state-owned investment company, to pump as much as $5 billion into Merrill, according to a report in today’s Wall Street Journal.
David Trone, an analyst at Fox-Pitt Kelton, said yesterday that Merrill’s write-downs could cause the firm to lose $4.07 a share in the fourth quarter and erase most of its profits for the year. Merrill will report fourth-quarter earnings in the middle of January.
The new write-downs would follow a third-quarter $7.9 billion reduction that Merrill booked on the value of US subprime home loans and collateralized debt obligations, Trone said.
Credit Suisse analyst Susan Roth Katzke also estimated yesterday that Merrill could take write-downs of $8 billion in the fourth quarter and may need to raise capital by selling assets.
She estimates that Merrill’s stake in financial news company Bloomberg could be worth as much as $4 billion and its stake in asset manager BlackRock could be north of $5 billion.
“We expect more senior management changes, some painful house cleaning,” Katzke said.
Separately, sources close to Merrill told The Post the firm was close to selling its middle market lending arm, called ML Capital, which could fetch up to $2.5 billion.
Merrill has been shopping the unit, which provides loans to midsize companies, for several months and sources close to the process said General Electric’s finance division is the lead bidder.
Merrill shares fell 23 cents to $54.50 yesterday. zachery.kouwe@nypost.com