John Thain, Merrill Lynch’s new chief executive, was reported to be in talks with Chinese and Middle Eastern sovereign wealth funds that could lead to the sale of a further stake to raise capital. According to the Observer newspaper, the discussions came just days after Mr Thain announced the sale of $4.4 billion of stock to Singapore investment firm Temasek on Christmas Eve as part of a wider plan to raise some $7.5 billion. Stan O'Neal, the bank's former chief executive, was forced to resign when Merrill revealed $8 billion write-downs in November related to US subprime mortgage investments and it has since announced plans to lay off 1,600 staff. The layoffs are likely to be in trading positions and related areas, and will not likely include the investment banking or private client groups. Merrill had about 64,000 employees as of the end of last September. But fears are mounting that Merrill Lynch may be forced to write down between $10 billion and $15 billion worth of assets related to collateralised debt obligations when it reports financial results next month. Aside from the $4.4 billion share sale, Merrill Lynch agreed to sell its middle-market lending business, Merrill Lynch Capital, to GE Capital, freeing up $1.3 billion in equity. It will also sell an additional $1.2 billion worth of stock to Davis Selected Advisors.