Washington Mutual nearing a $5 billion lifeline according to report

Update: Equity firm invests $7 billion in Washington Mutual

Washington Mutual may soon receive a much needed infusion of cash from a group of investors led by private equity firm TPG, according to a story in today’s Wall Street Journal.

A high flier during the housing boom, Washington Mutual was eagerly making subprime loans to people who are now having trouble making good on those obligations.

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Washington Mutual’s shares gained almost 30% to close at $13.11 a share on the news during trading Monday on the New York Stock Exchange. That compares with a 52-week high of $44.66 set on May 24, 2007.

The Journal report points out that the deal would “substantially dilute current WaMu shareholders, who have already lost 74% of their investment over the past year. WaMu’s market capitalization on Friday was just under $9 billion, after its shares dropped 11% that day.”

Some view the Washington Mutual deal as a possible sign that the worst may be over in the subprime mortgage mess and credit crunch that has plagued Wall Street in recent months.

The Journal cautions that the worst may not be over…

Still, an investment could expose TPG and its partners to a financial hit if the mortgage-market shakeout continues.

While banking regulators were likely apprised of WaMu’s plans, the government was not directly involved in forging a deal as in the recent purchase of Bear Stearns Cos., say people familiar with the matter.

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On the Web
Wall Street Journal
Washington Mutual stock quote
Washington Mutual investor relations

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