Moody's cut Merrill on fourth straight loss

NEW YORK, July 17 (Reuters) - Moody's Investors Service on Thursday cut its debt ratings on Merrill Lynch & Co MER.N, citing four consecutive quarters of sizable losses from bad mortgage debt.

Merrill posted a $4.9 billion second-quarter loss because of write-downs on Thursday and said it is selling close to $8 billion of assets in a bid to raise fresh capital. For details, see [ID:nN17199614]

The third-largest U.S. investment bank said it sold its 20 percent stake in Bloomberg L.P. back to the company for $4.425 billion and signed a letter of intent to sell Financial Data Services, a provider of administrative functions, for more than $3.5 billion.

"Merrill's sale of its stake in Bloomberg and its intent to sell FDS will substantially mitigate the impact of the second-quarter loss on capital ratios," Moody's said in a statement.

However, "management's options to sell assets or raise more common equity to offset unexpected losses are now reduced given the difficult industry and capital markets environment," Peter Nerby, senior vice president at Moody's said in the statement.

Moody's cut Merrill's rating one notch to "A2," the sixth highest investment grade, and awarded a stable outlook, indicating an additional rating change is not anticipated over the next 12-to-18 months.

The rating is now in line with Standard & Poor's "A" rating on Merrill, however S&P has a negative outlook on the bank, indicating it may be more likely to be cut over the next two years.

Moody's said the "A2," rating and stable outlook incorporates the potential for up to an additional $10 billion in pre-tax write-downs. This risk is mainly related to Merrill's exposures to risky residential mortgage-backed debt.

Merrill, which has recorded more than $30 billion of write-downs since the third quarter of last year, has been one of the hardest hit by the credit crisis on Wall Street.

(Reporting by Karen Brettell; Editing by Diane Craft)