I think I now understand the two transactions between Merrill and Lone Star Funds and Merrill and Temasek. In both cases, it appears that Merrill is protecting the other party from incurring a loss beyond a certain level. Here’s an excerpt from another good article. – Ilene 
Merrill Zigzag Makes Investors Uncomfortably Numb: Mark Gilbert
Commentary by Mark Gilbert, a Bloomberg News columnist.
Excerpt: "July 31 (Bloomberg) — To be comfortable is to be “in a state of tranquil enjoyment and content; free from pain and trouble; at ease,” the Oxford English Dictionary says. It’s hard to think of a less appropriate description of the situation at Merrill Lynch & Co. after the bank’s latest pirouette.
Two weeks ago, Chief Executive Officer John Thain told the world Merrill was “in a very comfortable spot in terms of our capital,” after reporting a $4.65 billion second-quarter net loss. This week, he decided he needed to raise an additional $8.55 billion to get truly comfy. If financial markets were courts of law, Thain would risk accusations of perjury.
Merrill’s balance-sheet flip-flop came with two more bombshells. First, those collateralized-debt obligations that used to trade at 100 percent of face value? Well, Merrill now values $31 billion of them at just 22 percent, meaning the rest of Wall Street has some catching-up to do on its writedowns.
And that $4.4 billion that Temasek Holdings Pte, Singapore’s sovereign wealth fund, invested in Merrill at Christmas? That backing turns out to be somewhat less than wholehearted, because Merrill is now paying Temasek $2.5 billion in restitution for the stock losing half of its value this year.
“Call me naive, but if these investors take an ownership stake by buying Merrill shares, why do they get compensated if the price falls?” Bill Blain, who produces a daily market report for bond broker KNG Securities LLP in London, wrote this week. “I thought providing equity capital to banks meant I shared in their upside and downside. Can I have the same, please?”
That “heads we win, tails we don’t lose” twist somewhat tarnishes the ringing endorsement from Manish Kejriwal, Temasek’s senior managing director for investments. He said on Dec. 26 that the deal was “a vote of confidence for the management team and the underlying strengths of Merrill Lynch’s franchise.”
Votes of confidence don’t typically come with just-in-case side agreements. I’m starting to think that when I die, I’d like to come back as a sovereign wealth fund.
Even Merrill’s decision to throw in the towel on its collateralized-debt adventure has a zigzag. The bank is selling almost $31 billion of CDOs to an affiliate of Dallas-based investment manager Lone Star Funds. The securities are priced at 22 percent of face value. Merrill, though, says it is lending the cash to fund 75 percent of the purchase.
That loan, moreover, is secured on the CDOs themselves. And Jeffrey Rosenberg, an analyst at Bank of America Corp. in New York, said in a report yesterday that a further 5 cent decline in the value of those securities would leave Merrill “on the hook” for any additional losses…
…Equity investors, in the words of Pink Floyd, have become “comfortably numb.” It’s time they woke up to the dangers still lurking in bank balance sheets."
Full article here.
