Merrill to buy clients' auction rate securities

NEW YORK (Reuters) - Merrill Lynch & Co Inc said on Thursday it will buy back its clients' auction-rate securities beginning next year, making the world's largest retail brokerage the latest to bail its customers out of the securities.

Merrill said it will buy back the securities beginning January 15, at which time it estimates more than 30,000 of its clients will own $10 billion of the paper.

Clients looking for access to their cash before then can borrow against the securities until mid-January at no cost, or a low cost, said spokesman Mark Herr. Merrill's offer to buy back the securities expires January 15, 2010.

Auction-rate debt has interest rates that reset through periodic auctions, typically held every seven, 28 or 35 days. Once seen as an equivalent to cash, investors have had trouble selling their securities as Wall Street brokerages stopped supporting the debt.

Merrill said it will buy back the assets at their face value, and that buying back the securities will not have a material impact on its capital levels or financial performance.

Merrill estimates that clients hold about $12 billion of the securities, but expects issuers to buy back about $2 billion of the debt between now and mid-January.

(Reporting by Dan Wilchins, editing by Richard Chang)