Merrill Lynch & Co Inc (MER.N) is
setting up a group to get rid of troubled or underperforming
assets and named U.S. fixed income sales head Doug Mallach its
head, according to an internal memo.
The group will help the brokerage figure out what to do
with assets such as collateralized debt obligations that have
been hammered by the subprime mortgage crisis. Mallach is
putting together a team to figure out whether to sell,
restructure, or hold onto these assets, a person briefed in the
Merrill Lynch has been battered by the widening credit
crisis, having written down more than $30 billion of assets
since the middle of last year.
That is why the bank is generally looking to slim down its
trillion dollars of assets and raise capital. The investment
bank is shrinking its mortgage and structured finance business,
selling off assets that trade infrequently and reducing certain
kinds of trading activity.
"We ... have to be better at using our balance sheet," said
John Thain, chief executive, on a conference call in January.
Regulators and investors globally are pushing banks to shed
assets and raise capital to reduce leverage, or debt levels
relative to assets.
In addition to assets such as CDOs, Mallach will deal with
assets that do not meet Merrill Lynch's performance hurdles.
The precise size of assets that Mallach -- a 17-year
Merrill veteran -- will manage is not clear. The bank had more
than $6.6 billion of net exposure to asset-backed CDOs as of
Mallach's group will focus on assets in the fixed income,
currencies and commodities business, where he was previously
head of the sales for the Americas.
Other banks have taken steps to separate underperforming
assets from the rest of their balance sheet. Citigroup Inc
(C.N) in November said Richard Stuckey, who helped stabilize
hedge fund Long-Term Capital Management, was going to fix its
troubled subprime mortgage portfolio.
(Reporting by Dan Wilchins; Editing by Andre Grenon)