by Calculated Risk on 5/01/2007 09:51:00 PM

From Mathew Padilla at the O.C. Register: Merrill Lynch scraps Option One's $1.5 billion credit line

The company said in a filing today that its mortgage unit lost a $1.5 billion credit line from Merrill Lynch & Co. Other investment banks reduced or rearranged their financial backing. For example, UBS cut its credit line from 1.5 billion to $750 million.

The changes in financing amount to a red flag because Option One needs to have $8 billion worth of credit lines as part of its agreement with potential buyer Cerberus. Bloomberg calculates that after the changes, Option One still has $12.25 billion of credit lines.