WaMu Rebounds on $5 B Investment Talk

123jump.com Staff
07 Apr, 2008
New York City

Washington Mutual, battered mortgage lender rebounded after talks of capital injection of $5 billion. The private equity investment led by TPG may take stake up to 24% in the company. WaMu stock soared 22% after it lost nearly 75% of its value in the last nine months of trading.

[R]11:45AM New York – Washington Mutual rebounds on the talks of capital infusion from private equity groups.[/R]

Washington Mutual is in final stages of discussion with a private equity group for a capital injection. The Texas Pacific Group is expected to invest $5 billion in the company in exchange for common and preferred stock. While the deal is likely to be agreed in a week, it can still collapse on regulatory and pricing issues, according to two people familiar with the deal negotiations in New York and Washington State.

Washington Mutual has fallen hard and steep in the last eighteen months of trading. The stock has traded between $42 and $47 in 2006 and in the first half of 2007 and since July 17, 2007 has lost more than 74% its value. Washington Mutual was valued at $9 billion before the news.

TPG could seek a board seat and keep its holding in the thrift along with other buyout partners below the federal requirements to register as a finance holding company.

Washington Mutual rapidly expanded in the nineties from its base in Seattle, Washington across the nation as it leveraged its expertise in mortgage lending. The boom in housing market only increased the bank’s exposure to risky loans what is now widely known as sub-prime loans.

Washington Mutual on Friday was the worst performing stock in S&P 500 after an analyst at bank and financial services research and merchant bank, KBW projected a sharply higher loss in 2008 of $3.15 per share compared to earlier projection of $1.45.

Washington Mutual ((WM)) surged 22% or $2.26 to $12.47 after the news.

WaMu lost $1.8 billion or $2.19 per share in the quarter ended in December of 2007. The savings and loan bank had $39 billion in loans and $303 billion in long term loans at the end of the period.