With doctors giving it just a couple days to live, WaMu has reached the end of the line. The Wall Street Journal is reporting that JP Morgan has agreed to buy the companies deposits, some of its branches, and other operations.
No word yet on deal terms or structure, but it should come as a relief to the FDIC. The company’s shareholders and senior debt holders are expected to be wiped out. (Including private-equity shop TPG, which recently led a $7 billion investment in the company. This may be the worst return on any private-equity investment in history. TPG alone will lose $1.35 billion.) WSJ:
The collapse of the Seattle thrift, which was triggered by a wave of deposit withdrawals, marks a new low point in the country’s financial crisis. But the deal, as constructed by the Federal Deposit Insurance Corp., could hold some glimmers of hope for the beleaguered banking system because it averts any hit to the bank-insurance fund.
Instead, J.P. Morgan agreed to pay $1.9 billion to the government for WaMu’s banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital. All WaMu depositors will have access to their cash, but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery…
While WaMu has been struggling since last year, its demise occurred with breathtaking speed. Starting Sept. 15, the day that Lehman filed for bankruptcy protection, WaMu’s customers began heading for the exits. Over the next 10 days, they yanked a total of $16.7 billion in deposits, according to the Office of Thrift Supervision. That was about 9% of the thrift’s deposits as of June 30. WaMu declined to comment.
See Also: WaMu Begins Final Swoon To Zero
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