Paperstand (MER in trouble; CLWR, AYR, CSGP)

The WSJ reports that Merrill Lynch (MER), in a bid to slash its exposure to risky mortgage-backed securities, has engaged in deals with hedge funds that may have been designed to delay the day of reckoning on losses. The transactions are among the issues likely to be examined by the SEC. The SEC is looking into how the firm has been valuing, or "marking," its mortgage securities and how it has disclosed its positions to investors. Regulators are scrutinizing whether Merrill knew its mortgage-related problem was bigger than what it indicated to investors throughout the summer. In one deal, a hedge fund bought $1bn in commercial paper issued by a Merrill-related entity containing mortgages. In exchange, the hedge fund had the right to sell back the commercial paper to Merrill itself after one year for a guaranteed minimum return. While the Merrill-related entity's assets and liabilities weren't on Merrill's own balance sheet, Merrill might have been required to take a write-down if the entity was unable to sell the commercial paper to other investors and suffered losses. The deal delayed that risk for a year.

According to the WSJ, Sprint (S) is weighing changes to its plans to offer high-speed wireless Internet service using WiMax technology, including a potential merger of its wireless broadband unit with Clearwire (CLWR). The co is mulling its options as it continues its hunt for a new CEO to succeed Gary Forsee. The CEO search and wireless broadband initiative will be among the topics the co's board reviews at a retreat this weekend. Meanwhile, Sprint is closing in on an agreement with Google (GOOG) to offer mobile devices tailored to the Web giant's new cellphone operating platform.

Barron's Online highlights Aircastle (AYR), whose shares have gained 9% YTD. There is still a 25-35% upside for the shares over the next 12mo's on top of rising dividend payments. Further acquisitions of aircraft also will boost earnings. The co is scheduled to report 3Q earnings on Nov. 9. "The biggest catalyst out of [next week's] earnings report is that they don't report anything special, that it's just business as usual," says John E. Leslie III, of Miller/Howard Investments.

"Inside Scoop" section reports that the CEO of CoStar (CSGP) sold $8.6m in stock this week in the wake of a poor reception to his co's latest earnings report. In total he sold 151K shares. On the co's earnings call last Thu, Florance told investors, "I think we may be seeing the end of one of the great industry booms here."