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Merrill CDO Deal Implies Billions More in Writedowns

In late July, Merrill Lynch sold a large block of collateralized debt obligations (CDOs) to a private equity group for approximately 20 cents on the dollar of initial par value. Were Citigroup to realize a similar sale price, it would need to take $12+ billion in charges or writedowns - and even if Citi were able to avert a firesale price, Merrill was carrying its CDO assets at 35% of par prior to the deal; Citi still maintains its CDO assets at close to 65% of par on the books. If the CDO assets of the two firms are roughly comparable, Citigroup has several billion dollars of writedowns it will need to take in the third quarter (or later).

From http://collegeanalysts.com/2008/07/29/merrill-lynch-mer-throwing-in-the-towel-on-cdos

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