Merrill Lynch & Co. took steps to shore up its endangered credit rating by selling $8.5 billion of stock and liquidating $30.6 billion of money-losing assets at a fifth of their original value.

The Singaporean government investment fund that bought shares in Merrill last December to become the firm’s biggest investor, Temasek Holdings, will buy $3.4 billion of stock in the new offering, New York-based Merrill said yesterday in a statement. Merrill will book a $2.5 billion expense related to the transaction as well as $5.7 billion of additional writedowns on collateralized debt obligations and associated hedges.

Merrill’s chief executive officer, John Thain, is pushing to rid the firm of its CDOs, which have contributed the majority of $18.7 billion of net losses reported over the past four quarters. Mr. Thain, 53, has had to raise capital to stave off credit-ratings downgrades and demonstrate to regulators that the firm can withstand losses. Standard & Poor’s on June 2 cut Merrill’s rating to A from A+ and assigned a “negative” outlook, indicating additional downgrades were possible.

“It does mark an attempt at curing the problem but at a tremendous cost to existing shareholders,” an analyst at Portales Partners LLC in New York, Charles Peabody, said. “How can you be pleased by that? It’s a necessity.”

Merrill may sell as much as 356.5 million shares in the offering, the firm said yesterday in a presentation for potential buyers. That represents a 36% increase over the number outstanding at the end of June. The price of the new shares will be set today according to the presentation.