NEW YORK - It hasn't taken John Thain long to put his stamp on the world's largest brokerage.
Named chairman and chief executive officer of Merrill Lynch & Co. Inc. three weeks ago, Thain secured a capital infusion yesterday worth up to $6.2 billion and sold off one of Merrill's lending units.
His fast action came at a critical time; some analysts say they think Merrill is facing credit-related write-downs of $10 billion for the fourth quarter.
Merrill said it would receive a cash infusion from Singapore's Temasek Holdings and Davis Selected Advisors, a New York money manager. Separately, it sold its commercial-finance business, Merrill Lynch Capital, to General Electric Co.'s finance arm for an undisclosed price.
But the company's shares, which initially rose on news of the Temasek and Davis investments, fell as it became clear they bought their stakes in Merrill at a 14 percent discount, the price the firm apparently had to pay to bolster its balance sheet.
Thain initiated both deals upon taking over from ousted chief executive officer Stan O'Neal on Dec. 1.
"One of my first priorities at Merrill Lynch was to strengthen the firm's balance sheet, and we have made great progress toward that by bolstering our capital position through these investments and our announced sale of Merrill Lynch Capital," he said in a statement yesterday.
Both steps are expected to help shore up Merrill's balance sheet, which has been battered by the global credit turmoil. Deteriorating mortgage-related investments and corporate loans caused the biggest quarterly loss in Merrill's 93-year history during the third quarter, as it suffered $8.4 billion of write-downs. (A write-down means the value of assets on a company's books is reduced.)
With fourth-quarter results set to be released in January, yesterday's asset sale and investment were seen as getting ahead of any potential bad news. They also demonstrate that Thain is not wasting time trying to right the investment bank's finances.
"On balance, this continues to signal that problems are significant, but that [management] is taking steps to get beyond it," said Fox-Pitt, Kelton Inc. analyst David Trone in a note to clients.
However, he said the total capital-raising effort would dilute existing Merrill shareholders about 13 percent. Merrill shares slipped $1.64, or 2.95 percent, to $53.90.
Temasek, a government-sponsored investment fund, will acquire a 9.9 percent stake in Merrill at $48 a share for $4.4 billion - and can buy an additional $600 million by March 28.
Davis Advisors is a closely held company that was founded by former Bank of New York executive Shelby M.C. Davis. Its purchase represents a 2.5 percent stake in Merrill.
Global banks and investment firms have written down an estimated $105 billion this year alone from exposure to defaulting subprime loans and other debt commitments. That has caused a number of financial companies to secure deals involving infusions from state-owned investment funds, mostly from Asia and the Middle East.