Singapore’s Temasek gets approval to up Merrill stake

August 27, 2008
Singapore Democrats

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AFP

Singaporean sovereign wealth fund Temasek Holdings has received approval from US anti-trust regulators to raise its stake in Merrill Lynch, a source said Wednesday.

Temasek said in July that it was investing a further 3.4 billion US dollars into Merrill Lynch as part of the American investment bank’s efforts to raise new capital.

Temasek is expected to receive the formal letter of approval this week, said the source, who declined to be identified.

The firm initially invested 4.9 billion US dollars in Merrill Lynch in December after the Wall Street titan sought fresh capital in the wake of huge losses following the meltdown in subprime, or higher risk, US mortgages.

Temasek has said it held an estimated 9.0 percent stake in Merrill Lynch at the end of March. The additional investment of 3.4 billion US dollars will raise that to between 13.0 percent and 14.0 percent, said the source.

The Singaporean firm is the largest shareholder in Merrill Lynch, which announced in July that it was dumping billions of dollars of mortgage debt at a steep loss and raising 8.5 billion US in new capital.

Temasek’s December investment came with a requirement that if Merrill raised more capital within 12 months at a lower share price, Temasek would be compensated for the difference.

That proviso has kicked in, with Temasek putting the 2.5-billion-US-dollar compensation back into the bank along with another 900 million US dollars to make up the latest investment.

Temasek said Tuesday it had made a record profit of 18.2 billion Singapore dollars (12.8 billion US) in the year to March.

Temasek and the Government of Singapore Investment Corp. are the city-state’s two main investment vehicles.

Sovereign wealth funds have emerged as big hitters in global finance, bailing out distressed international banks hurt by the recent financial turmoil.

Singapore’s Senior Minister of State for Finance, Lim Hwee Hwa, said Wednesday that the city-state’s investments had not escaped the impact of the turmoil but had been made on a long-term basis.

“This long-term orientation will keep us from selling in panic in a market downturn,” Lim told parliament, adding the downturn also offered attractive investment opportunities.

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