WALL STREET JOURNAL: During a conference call with analysts, the Wall Street Journal reported that EarthLink (ELNK) CEO Rolla Huff indicated the company is open to doing a deal with Time Warner’s (TWX) AOL unit after commenting that the company wants to open the door for consolidation in the Internet dial-up access market…The Wall Street Journal reported that, due to falling used-vehicle prices and continued turmoil in the credit markets, General Motors (GM) and Ford (F) are said to be scaling back significantly their auto-leasing business. A spokesperson for the auto-finance unit Wells Fargo (WFC) also informed dealers it will no longer finance leases after this month…FINANCIAL TIMES: The Financial Times reported that following Merrill Lynch’s (MER) disposal of $30B in mortgage-related securities, global banks that include UBS (UBS) and Citigroup (C) are under pressure to right down or sell billions of dollars in toxic assets…BASF SE is said to be on the lookout for acquisitions in the U.S. and one of the possible acquisition targets is W.R. Grace & Co. (GRA), the Financial Times Deutschland reported…BLOOMBERG: As losses as its securities unit increase, Bloomberg reported that shareholders are putting pressure on Deutsche Bank (DB) to buy a German consumer lender such as Deutsche Postbank…

Investors want other banks to follow in Merrill’s footsteps-FT
The world’s largest banks, including Citigroup (C) and UBS (UBS), are coming under more pressure to write down or sell billions of dollars in toxic assets, after Merrill Lynch (MER) announced that it would sell $6.7B of its collateralized debt obligations. However, Merrill sold the debt obligations for just 22 cents on the dollar, leading to worries that banks may have to take more large writedowns and carry out highly dilutive capital raising transactions.

Transocean and Tidewater can be had near record-low valuations-Barron’s Online
After the pullback in the price of oil, two offshore energy-services stocks, Transocean (RIG) and Tidewater (TDW), are down from their lofty heights to very attractive valuations. Not only are Transocean and Tidewater market leaders in the hottest space in energy, but right now their stocks are also the cheapest in the offshore drilling industry. Jefferies analyst Judson Bailey says, “I think the pullback in both instances is probably overdone.” Offshore drilling activity continues to be robust in the global hunt for oil to meet rising demand and replace aging fields. Day rates for drilling rigs and vessels continue to rise due to limited supplies. This bullish cycle should last several more years given that companies exploring for oil and gas are signing pricier contracts extending into 2015-2017 to stake claims on those rigs. The nine new rigs Transocean will receive in 2009-2011 are already contracted. With this flood of free cash flow, Tidewater is expected to tag on another stock-buyback program, and Transocean could do the same or offer a hefty special dividend. Bailey says he is banking on a turnaround in Tidewater’s stock after management stepped up efforts to manage high repair and maintenance costs for its fleet. Transocean is more of a multiple expansion story as the market starts to appreciate its highly visible double-digit earnings growth. So unless there is a drastic downturn in the global economy, shares of Transocean and Tidewater should leap ahead with solid earnings growth.

Merrill Lynch “takes it lumps” and moves on-WSJ
By selling $30B of CDOs for an average price of 22c on the dollar, Merrill Lynch (MER) John Thain admitted that the losses in the financial market aren’t just “going away,” the Wall Street Journal’s “Heard on the Street” says. Instead of freeing their balance sheet by selling hard-hit assets at a loss, other financial chiefs are digging themselves deeper and will end up taking a worse hit when they attempt to fix the problem. The WSJ points to Citigroup (C), which analysts have said may need to reduce their value by an additional 21%, or Bank of America (BAC), which currently values its CDOs at about 35c on the dollar and “makes no sense”. In light of Merrill’s sale, other large banks including UBS (UBS), Barclays (BCS) and Royal Bank of Scotland (RBS) may all need to reassess their CDO holdings.

Vulture investors ravenous for distressed paper-WSJ
The Wall Street Journal reports that more deals could be coming such as the one Lone Star Funds formed with Merrill Lynch (MER) to buy $30.6B of its toxic CDOs at a 78% discount to face value, indicating a ravenous hunger by vulture investors for distressed paper. The WSJ says dozens of firms — including BlackRock (BLK), Citadel Investment and Fortress Investment — have raised funds, possibly as much as $100B in all to invest in distressed mortgages.