Rising above it?

Merrill Lynch's decision to ditch its collateralised debt obligation portfolio in July has been spun as a brave attempt to draw a line under its structured credit losses. But how good is the deal, and does it represent a template for other firms struggling to stay above ground under the weight of subprime writedowns? Peter Madigan investigates


Merrill Lynch's announcement on July 28 that it would sell the majority of its super-senior collateralised debt obligation of asset-backed securities (CDO of ABS) portfolio to a private equity fund caught the credit markets completely unawares. The surprise turned to astonishment once the terms of the deal were revealed. An illiquid CDO portfolio with a notional value of $30.6 billion, valued at $11.1 billion at the end of the second quarter, was sold for just $6.7 billion - implying an average

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