April 22 (Bloomberg) -- Merrill Lynch & Co., the third- biggest U.S. securities firm, is raising $9.55 billion by selling bonds and preferred shares after writing down the value of $6.5 billion of assets.

The firm sold $7 billion of senior unsecured notes today in its biggest debt offering, luring investors with yields over Treasuries as much as triple what it paid a year ago. Merrill is also selling $2.55 billion of perpetual preferred shares that yield 8.625 percent, its largest sale of the securities.

Merrill Lynch follows Citigroup Inc. and JPMorgan Chase & Co. in raising capital through preferred stock sales to help compensate for losses stemming from the collapse in subprime mortgages. The world's biggest banks and securities firms have raised at least $194 billion since recording more than $290 million in losses and writedowns.

``The size shows you there's a lot of cash on the sidelines,'' said Mirko Mikelic, who helps manage $22 billion as a portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan. ``Unless you think there's going to be a complete financial system breakdown, a lot of the names have been looking pretty good.''

Citigroup, the largest U.S. bank by assets, yesterday sold $6 billion of perpetual hybrid preferred shares at a yield of 8.4 percent. New York-based JPMorgan offered a similar amount of the securities last week at 7.9 percent.

New York-based Merrill, which announced its third-straight quarterly loss last week, has had $31.7 billion in writedowns and raised at least $13.6 billion in capital.

``If there are more writedowns, you need to raise more capital,'' Mikelic said.

Citigroup, JPMorgan

Merrill split its bond sale between $1.5 billion of 5-year 6.15 percent notes that priced to yield 325 basis points more than Treasuries of similar maturity and $5.5 billion of 10-year 6.875 percent notes that paid a spread of 320 basis points, Bloomberg data show. That compares with the 107-basis point spread Merrill paid on $1 billion of 10-year notes in April 2007.

Moody's Investors Service assigned Merrill's new senior notes its fifth highest rating of A1, and Standard & Poor's ranked them an equivalent A+. The debt may be sold as soon as today. The preferred shares are rated two steps lower at A3 and A- at Moody's and S&P.

``We're pleased with the outcome of Merrill Lynch's offerings over the last two days, which illustrates strong investor demand and confidence in the firm's prospects going forward,'' Chief Financial Officer Nelson Chai said in a prepared comment.

Merrill on April 17 reported a first-quarter net loss of $1.96 billion, compared with earnings of $2.16 billion a year earlier.

Share Sale

Chief Executive Officer John Thain told reporters during a conference call that day that he was ``open'' to raising additional capital through a sale of preferred shares, such as JPMorgan's $6 billion offering last week. Thain had said previously that Merrill didn't need to sell more equity to raise capital.

Moody's placed $261 billion of Merrill's long-term debt on review for a possible cut following the earnings announcement.

``Mortgage market conditions are unlikely to improve in the second half of 2008, depressed by a weakening economic outlook, rising defaults and continuing illiquidity in the markets for subprime mortgages and structured credit products,'' Moody's said in the April 17 report. ``This environment will delay Merrill's exit of these problematic positions as well as its return to normal profitability.''

Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Bryan Keogh in New York at bkeogh4@bloomberg.net

Last Updated: April 22, 2008 17:59 EDT