Merrill Lynch & Co. on Thursday firmly denied a widespread rumor that it was abandoning the mutual thrift conversion business.

Three different market sources said Merrill Lynch, in the face of corporate downsizing and falling thrift prices, had decided to cede the lucrative conversion field to boutique firms.

But Merrill said Thursday it was firmly committed to the business.

"The rumors are absolutely false," said Henry Michaels, director for thrifts in the eastern United States. "We are committed to the conversion business, particularly as a subscription and community offering manager."

Merrill recently fired a vice president in the group, Mary Anne Callahan, and she apparently contacted many of the boutique firms seeking employment.

Her departure leaves the Merrill Lynch conversion team with four senior executives - including Mr. Michaels and director James Donahue - in addition to analysts.

A dominant adviser in mutual-to-stock conversions before 1990, Merrill Lynch last year again began to go after the business aggressively.

It advised the conversion of $4.5 billion-asset Long Island Savings Bank, and most recently that of $930 million-asset SIS Bank, which closed Wednesday.

But because of falling thrift stocks, Springfield, Mass.-based SIS reduced the price of its initial public offering and is likely to raise only about $40 million instead of the $54 million originally anticipated.

Such comedowns were frequent last year, as falling thrift stocks dampened conversion fever.

"When we get an equilibrium on thrift equity prices - and it is settling down now - conversions will continue at a steady pace," said Ben Plotkin, director of corporate finance at Ryan, Beck & Co.

Before 1990, large Wall Street firms like Merrill dominated mutual conversions, using their huge national retail networks to sell much of the offerings from large conversions.

But that year Jamaica Savings Bank raised $130 million locally though a community subscription, and forever changed the dynamics of mutual conversions, said Mark B. Cohen, a principal with Sandler O'Neill & Partners. Mr. Cohen, as a partner with the now defunct Adams Cohen, advised the New York thrift.

In both the Long Island Savings and SIS deals, Merrill also raised the capital locally, a significant change from pre-1990 conversions when it acted as a national underwriter.

There are more than 700 mutual thrifts remaining in the country with assets in excess of $50 million each.

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