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Merrill posts $7.5 billion third-quarter loss

NEW YORK - Merrill Lynch & Co reported a third-quarter net loss of $7.5 billion on Thursday -- worse than analysts had expected -- on write-downs and credit losses on complex debt securities.

The brokerage house, which last month accepted a takeover bid from Bank of America Corp, also said it would issue $10 billion of non-voting preferred stock and related warrants to the U.S. Treasury under the government program that gave Bank of America a $25 billion capital injection earlier this month.

In addition, because of the Bank of America deal, Merrill said it was no longer seeking to sell a controlling stake in its Financial Data Services subsidiary.

Merrill had said when it announced second-quarter results that it had signed a letter of intent to sell FDS, which provides administrative services to the company's mutual funds and retail banking businesses.

The bank did receive a pretax gain of $4.3 billion from the sale of its 20 percent stake in Bloomberg, the media and data company, which had also been announced with its second-quarter results.

Merrill said its third-quarter net loss applicable to common shareholders widened to $5.58 per share from $2.82 per share, or $2.3 billion, a year earlier.

The company posted a loss of $5.56 per share from continuing operations.

Analysts' average forecast was a loss of $5.18 per share, according to Reuters Estimates.

Merrill, like former peers Lehman Brothers and Bear Stearns Cos, has struggled to survive the credit crisis, which has crippled its large mortgage and complex debt businesses.

In July, Merrill sold a $30.6 billion portfolio of toxic securities to private equity firm Lone Star Funds, taking a $5.7 billion write-down and raising capital in the process -- but this was not enough to solve its problems.

The company's share price continued to fall, and Chief Executive John Thain engineered the speedy sale to Bank of America on the same weekend that Lehman Brothers was forced into bankruptcy.