Merrill Lynch drops leveraged loan exposure by 47% from first-quarter balance

By Jennifer Lanning Drey

Portland, Ore., July 17 - Merrill Lynch & Co. reduced its leverage finance commitments to $7.5 billion during the second quarter, demonstrating a 47% reduction from the firm's $14.2 billion leveraged loan balance at the end of the first quarter, Nelson Chai, Merrill Lynch's chief financial officer, reported Thursday during its quarterly earnings call.

The reduction was achieved through sales completed at levels that were, on average, consistent with the marks taken on them, he said.

"Within commercial real estate and leveraged finance, we remain comfortable with the quality of both of these portfolios but have substantially reduced our net exposure to these asset classes, consistent with our overall strategy to reduce risk," Chai said.

Merrill Lynch took $348 million in write-downs related to its leveraged loan exposure for the second quarter.

Firm-wide, Merrill Lynch reported a second-quarter net loss from continuing operations of $4.6 billion, compared to net earnings from continuing operations of $2.0 billion in the second quarter of 2007.

"This was obviously a difficult and disappointing quarter for us in terms of bottom line," John A. Thain, Merrill Lynch's chief executive officer, said during the call.

Most of Merrill Lynch's losses during the quarter came from existing mortgage and mortgage-related positions and from exposure to monolines, both positions that continued to deteriorate during the quarter, he said.

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