Merrill Lynch writes down $5.5 billion as they mark to market cdos made up of subprime mortgage debt obligations

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Merrill Lynch announced today that it will take a write down charge of $5.5 billion related to the credit crunch. Stunningly $4.5 billion of the losses will be directly related to charges associated with the marking to market of collateralized debt obligations (CDOs) currently held by the company. The remaining $1 billion is a result of fees and operating costs associated with prior company commitments. From Market Watch:

“Despite solid underlying performances in most of our businesses in the third quarter, the impact of this difficult market was much more severe in certain of our FICC [fixed income, currencies & commodities] businesses than we expected earlier in the quarter,” said Stan O’Neal, chairman and chief executive, in a statement.

“While market conditions were extremely difficult and the degree of sustained dislocation unprecedented, we are disappointed in our performance in structured finance and mortgages,” he added. “We can do a better job in managing this risk, as we have done with other asset classes.”

Merrill becomes just the latest to the write down party, trumping the $3.4 billion write down announcement made by UBS just a week ago.

From the Merrill press release:

The company expects to report a net loss per diluted share of up to 50 cents, resulting from significant negative mark-to-market adjustments to its positions in two specific asset classes: collateralized debt obligations (CDOs) and subprime mortgages; and leveraged finance commitments. These mark-to-market adjustments primarily affect Merrill Lynch’s Fixed Income, Currencies & Commodities (FICC) business.

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