Equity firm invests $7 billion in Washington Mutual

Washington Mutual today announced a $7 billion bailout by an investment group led by TPG, the private equity firm. The group will seat two directors on WaMu’s board - David Bonderman, a co-founder of the equity firm, and Continental Airlines chairman & CEO Lawrence Kellner.

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Because of its heavy investment in subprime mortgages, WaMu has suffered crippling losses. It reported a fourth-quarter net loss of $1.87 billion, and projected a first-quarter loss of another $1.1 billion.

New York Times Dealbook columnist Andrew Ross Sorkin notes that TPG’s move is the latest in a trend: private equity investment in public companies.

Private equity bigwigs like David Bonderman used to sneer at the idea of investing in public companies. You know, companies that are traded on stock exchanges — the kind ordinary folks buy. Instead, they espoused the virtues, or at least the big rewards, of taking public companies private.

That was two years ago, when credit was easy. Back then, the lords of private equity were all doing the same thing: buying companies outright with borrowed money (leverage is the Wall Street term) and then sitting back and getting rich
…Welcome to the new business of private equity: public equity. Yes, the buyout kings have been reduced to playing in the same sandbox as the rest of us.

On the Web
Dealbook blog
Bloomberg story

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