Maine settles with Merrill Lynch
Merrill Lynch will pay back $20 million the state invested in a mortgage-backed fund that tanked soon after being recommended by the financial services company, according to a statement released today by State Treasurer David Lemoine.
The agreement brings to an end the debacle around the state's investment in Mainsail II. In August 2007, Maine invested nearly $20 million -- or about 3% of the state's investment portfolio -- in Mainsail II, a fund run by U.K.-based Solent Capital Partners that held corporate bonds backed by subprime mortgages, according to the Blethen Maine News Service. A longtime financial advisor from Merrill Lynch recommended the investment to the state. At the time, Mainsail II carried the highest credit ratings from S&P and Moody's, but 12 days into Maine's 23-day investment period the company's assets were frozen by Bank of New York.
On June 30, the close of the recent fiscal year, Maine's investment in Mainsail was worth less than $7 million. At the time, Lemoine said the fund would likely be auctioned off in September.
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