UPDATE 2-Merrill selling assets, posts $4.9 bln Q2 loss

Thu Jul 17, 2008 5:08pm EDT

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(Adds details on losses, investor comment, downgrade)

NEW YORK, July 17 (Reuters) - Merrill Lynch & Co MER.N on Thursday said it is selling close to $8 billion of assets in a bid to raise fresh capital and posted a $4.9 billion second-quarter loss because of write-downs.

Merrill said it sold its 20 percent stake in Bloomberg for $4.425 billion. The bank is also in discussions to sell a controlling interest in Financial Data Services Inc for about $3.5 billion. The company provides administrative services to Merrill's mutual funds and retail banking.

The third-largest U.S. investment bank recorded $9.4 billion of write-downs of repackaged debt, including collateralized debt obligations, as well as exposure to bond insurers.

Merrill has suffered about $40 billion of write-downs since the credit crisis began a year ago, making it among the U.S. banks hit hardest by the credit crunch.

"They're moving in the right direction but Merrill still has significant challenges, including material exposure to collateralized debt obligations," said Chris Armbruster, analyst at Al Frank Asset Management, which holds 24,000 Merrill shares. "We like the company, but it's going to be a tough go."

The third-largest U.S. investment bank said its quarterly loss applicable to common stockholders equaled $4.97 per share compared with a profit of $2.07 billion, or $2.24 per share, a year earlier. Net revenue fell to 7.5 billion, while the bank's liquidity pool increased to about $92 billion.

Excluding restructuring charges, Merrill lost $4.42 a share, compared with analysts' average expected loss of $1.94 a share according to Reuters Estimates.

Moody's Investors Service downgraded Merrill one notch to A2, bringing its rating of the bank's credit quality in line with that of Standard & Poor's.

Shares of the company fell 6.9 percent to $28.60 in after-market trading after closing Thursday up $2.73 at $30.73 on the New York Stock Exchange. (Reporting by Elinor Comlay, editing by Mark Porter)