NEW YORK – Merrill Lynch & Co. Inc. (MER) has seized $800 million of assets from troubled hedge funds managed by Bear Stearns Cos. Inc. (BSC) and plans to sell them off on Wednesday, sources familiar with the situation said.
The move makes it unlikely that the funds will be able to restructure. Merrill's selling such a large quantity of illiquid assets, which are mainly collateralized debt obligations, could force prices in that market markedly lower, sources said.
The two funds suffered double-digit losses through April after making bad bets on securities backed by subprime loans.
Merrill initially seized the assets on Friday and planned to sell them on Monday, but it refrained from doing so until it saw the restructuring plan from Bear Stearns, sources said.
After seeing the plan, which included $1.5 billion of additional capital from Bear, Merrill decided to instead sell off the assets.
The assets are mainly collateralized debt obligations supported by asset-backed securities, according to dealers that had seen the list of securities up for sale.
Merrill Lynch declined to comment. Bear Stearns was not immediately available for comment.