================================================================= WASHINGTON MUTUAL INC BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2008 (ISSN XXXX-XXXX) September 29, 2008 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- WASHINGTON MUTUAL INC BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's cases. New issues are prepared by Ria R. Samson, Psyche S. Castillon, Ivy B. Magdadaro, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of WASHINGTON MUTUAL INC BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO WASHINGTON MUTUAL INC BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF WASHINGTON MUTUAL INC. [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2008 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] WASHINGTON MUTUAL INC.'S CHAPTER 11 DATABASE [00005] DEBTORS' LIST OF 13 LARGEST UNSECURED CREDITORS [00006] WAMU EFFECTS CONDITIONAL EXCHANGE OF PREFERRED SECURITIES [00007] FITCH DOWNGRADES WASHINGTON MUTUAL'S IDR RATING TO 'C' [00008] S&P RATES WASHINGTON MUTUAL NEGATIVE ON CREDITWATCH [00009] MOODY'S DOWNGRADES WAMU'S SENIOR DEBT RATING TO "Caa2" [00010] AEGON NV HAS $181-MIL. EXPOSURE TO WASHINGTON MUTUAL [00011] WAMU TO BE REPLACED BY FLOWSERVE CORP. IN S&P 500 INDEX [00012] JUDGE WALRATH SCHEDULES OCTOBER 3 STATUS CONFERENCE KEY DATE CALENDAR ----------------- 09/26/08 Voluntary Petition Date 10/26/08 Deadline to File Schedules of Assets and Liabilities 10/26/08 Deadline to File Statement of Financial Affairs 10/26/08 Deadline to Provide Utilities with Adequate Assurance 01/24/09 Deadline to Make Decisions About Lease Dispositions 12/25/08 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 01/24/09 Expiration of Exclusive Plan Filing Period 03/25/09 Expiration of Exclusive Solicitation Period 09/26/10 Deadline for Commencement of Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO WASHINGTON MUTUAL INC BANKRUPTCY NEWS ----------------------------------------------------------------- WASHINGTON MUTUAL INC BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of WASHINGTON MUTUAL INC BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving WASHINGTON MUTUAL INC BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. Currently, we provide similar coverage about the restructuring proceedings involving Lehman Brothers Holdings, Inc., Bear Stearns Co.'s High-Grade Structured Credit Strategies Master Fund, Ltd., and High-Grade Structured Credit Strategies Enhanced Leverage Master Fund, Ltd., Canadian ABCP Trusts, Refco, Inc., Cadence Innovation LLC, Progressive Molded Products, Inc., BHM Technologies Holdings, Inc., Delphi Corp., Plastech Engineered Products, Inc., Blue Water Automotive Systems, Inc., Dana Corp., Meridian Automotive Systems, Inc., Tower Automotive Inc., Boscov's Department Store, LLC, Mervyn's LLC, Steve & Barry's Manhattan, LLC, Kmart Corp., Linens 'n Things, Inc., Sharper Image, Movie Gallery, Inc., Tweeter Home Entertainment Group, Inc., SemGroup L.P., Enron Corp., Calpine Corporation, Mirant Corp., Vertis Holdings, Inc., American Color Graphics, Inc., Quebecor World, Inc., Tricom, S.A., Adelphia Communications and Adelphia Business Solutions, Winstar Communications, Werner Holding Co. (DE), Inc., SIRVA, Inc., Sea Containers, Ltd., Allied Holdings, Performance Transportation Services, Frontier Airlines Holdings, Inc., ATA Airlines, Inc., Delta Air Lines, Northwest Airlines, US Airways, UAL Corporation and United Airlines, Mesaba Aviation, LandSource Communities Development LLC, Kimball Hill, Inc.,TOUSA, Inc., Levitt and Sons LLC, Neumann Homes, Inc., American Home Mortgage Investment Corp., New Century Financial Corp., The Education Resources Institute, Inc., Vesta Insurance Group, Inc., and its six insurance units, National Century Financial Enterprises, Greektown Holdings, LLC, Tropicana Entertainment, LLC, PRC, LLC, Wellman Inc., Propex Inc., Solutia, Inc., Exide Technologies, Bennigan's and Steak and Ale restaurants, Buffets Holdings, Inc., Interstate Bakeries Corporation, Parmalat Finanziaria, S.p.A., Bally Total Fitness Holding Corp., Saint Vincent Catholic Medical Centers, ASARCO LLC, Federal-Mogul Corporation, W.R. Grace & Co., Owens Corning, USG Corporation, the Roman Catholic Church in the United States, and the city of Vallejo, California. ================================================================= [ ] YES! Please enter my personal subscription to WASHINGTON MUTUAL INC BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) WASHINGTON MUTUAL INC BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of WASHINGTON MUTUAL INC BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF WASHINGTON MUTUAL INC. ----------------------------------------------------------------- Washington Mutual Inc. 1301 Second Avenue Seattle, WA 98101 Telephone (206) 461-2000 Fax (206) 554-2778 http://www.wamu.com/ Washington Mutual, Inc., was incorporated on September 25, 1889, as the Washington National Building Loan and Investment Association to offer its stockholders a safe vehicle for investing and lending. By June 1908, it changed its name to Washington Savings and Loan Association. In 1983, WaMu acquired the brokerage firm Murphey Favre. The bank converted from a mutual form of ownership to a capital stock savings bank on March 11, 1983, and issued common stock on the same date. Since the early 1990s, WaMu expanded its retail banking and lending operations organically and through a series of acquisitions of retail banking institutions and mortgage companies. By October 1, 2005, the Company acquired Providian Financial Corporation, a credit card lender, thereby entering the credit card lending business. At December 31, 2007, WaMu had 49,403 employees. Today, it's employment ranks are far thinner. The company's headquarters are located at 1301 Second Avenue, in Seattle, Washington. Company Structure and Regulation WaMu is incorporated in the state of Washington and transformed itself into a savings and loan holding company, and owned two banking subsidiaries, Washington Mutual Bank and Washington Mutual Bank fsb until the Office of Thrift Supervision seized those banks earlier this month. WaMu owns numerous non-bank subsidiaries. WaMu is a legal entity separate and distinct from the banks that were seized and its non-banking subsidiaries. Its principal sources of funds are cash dividends paid by those subsidiaries, investment income and borrowings. WaMu -- the parent holding company -- is not subject to any explicit regulatory capital requirement. ROAD TO BANKRUPTCY Business Strategy Changes Since late 2006, WaMu proactively changed its business strategy to respond to declining housing and market conditions. As noted in an OTS Fact Sheet, changes included tightening credit standards, eliminating purchasing and originating subprime mortgage loans, and discontinuing underwriting option ARM and stated income loans. Management reduced loans originated for sale and transferred held for sale loans to the held for investment portfolio. WMB focused on shrinking its balance sheet and developing a retail strategy through its branch operations. In December 2007, the company announced the resizing of its Home Loans business, including the elimination of about 2,600 employee positions, closure of about 190 home loan centers and sales offices, and closure of nine loan processing and call centers. In late 2006 and 2007, WMB began to build its capital level through asset shrinkage and the sale of lower-yielding assets. In April 2008, WaMu received $7 billion of new capital from the issuance of common stock. Since December 2007, WaMu has infused $6.5 billion into WMB. Operating Losses WMB recorded a net loss of $6.1 billion for the three quarters ended June 30, 2008. In the second quarter of 2008, WMB management disclosed that the Bank's credit quality had deteriorated and it might incur up to $19 billion in losses on its single-family residential mortgage portfolio. WMB increased its loan loss provisioning in response to the deteriorating housing market. Loan loss provisions increased from $1.6 billion in the fourth quarter of 2007, to $3.6 billion in the first quarter of 2008 and $6.0 billion in the second quarter of 2008. Nevertheless, WaMu Chief Executive Officer Kerry Killinger noted in a press statement that "in face of the unprecedented housing and mortgage market conditions, we are continuing to execute a comprehensive plan designed to ensure that we have strong capital and liquidity." Deposit Outflows, Ratings Downgraded Despite WaMu's move to appease its creditors, by early June 2008, there were rumors of a regulatory action for WaMu. The company though denied those rumors by issuing a press statement on June 11, 2008. However, by September 2008, the turmoil in the U.S. financial markets was at its height. Among others, Lehman Brothers Holdings, Inc., the U.S.'s fourth largest investment bank, filed for Chapter 11; Bank of America Corp. agreed to buy Merrill Lynch & Co.; and insurance company American International Group accepted an $80 billion bailout from the U.S. Government to avoid bankruptcy. At around the same time, rating agencies lowered its ratings of WaMu. Standard & Poor's Ratings Services lowered its counterparty credit rating on WaMu to 'BB-/B' from 'BBB-/A-3'. Fitch Ratings placed the ratings of Washington Mutual, Inc., at 'BBB-/F3' and Washington Mutual Bank at 'BBB/F3'. Eventually, significant deposit outflows affecting WMB began on September 15, 2008. As noted in an OTS Fact Sheet, during the next eight business days, WMB deposit outflows totaled $16.7 billion, shortening the time available to augment capital, improve liquidity, or find an equity partner. In response, WaMu asserted that the rating actions reflected the uncertainty in the current financial markets rather than a thorough evaluation of the company's financial condition. Bank Receivership In light of the circumstances, WMB experienced insufficient liquidity. By September 25, 2008, WMB was closed by the OTS and the FDIC was named receiver. Subsequent to the closure, JPMorgan Chase & Co. acquired all deposits, assets and certain liabilities of WMB's banking operations from the FDIC as receiver for $1.9 billion. Claims by equity, subordinated and senior unsecured debt holders were not acquired. All depositors were fully protected with no cost to the Deposit Insurance Fund. "WaMu's balance sheet and the payment paid by JPMorgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses," FDIC Chairman Sheila C. Bair said in a press statement. In connection with the sale of assets of WMB to JPMorgan, the FDIC noted that it transferred to JPMorgan Chase all Qualified Financial Contracts to which WMB was a party. Qualified Financial Contracts include swaps, options, futures, forwards, repurchase agreements and any other Qualified Financial Contract as defined under Section 1821(e)(8)(D) of the Banks and Banking Code. Also, under the asset sale, included in the liabilities acquired by JPMorgan are WMB's covered bonds, other secured debt and securities issued by the Washington Mutual Master Trust and Washington Mutual Master Note Trust. The holders of equity, subordinated and senior unsecured debt in WMB are creditors of the receivership for WMB and are entitled to file claims in the receivership for recovery of any amounts that may be due to them. JPMorgan said in a public statement that it expects to convert WMB's consumer banking, home lending and credit card businesses to the Chase brand and technology platforms over the next two years. JPMorgan also won't be acquiring any assets or liabilities of WaMu, the parent holding company of WMB. WaMu and the interests of equity, debt holders or other creditors of WaMu are not included in the closure or receivership of the Bank. Bankruptcy Filing Subsequently, WaMu and its subsidiary, WMI Investment Corp., filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware on September 26, 2008. In its bankruptcy filing, WaMu listed $32.8 billion in assets and $8.1 billion in debts as of the Petition Date. The company also declared 1.7 billion outstanding common stock shares issued as of September 26, 2008. WaMu also disclosed that TPG Capital, L.P. owns, controls or holds 5% or more of voting securities of the company. ----------------------------------------------------------------- [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2008 ----------------------------------------------------------------- WASHINGTON MUTUAL, INC., AND SUBSIDIARIES Unaudited Consolidated Statement of Financial Condition As of June 30, 2008 ASSETS Cash and cash equivalents $7,235,000,000 Federal funds sold and securities purchased under agreements to resell 2,750,000,000 Trading assets, including securities pledged of zero and $388 2,308,000,000 Available-for-sale securities, total amortized cost of $25,756 and $27,789: Mortgage-backed securities, including securities pledged of $121, and $1,221 18,241,000,000 Investment securities, including securities pledged of $112 and $3,078 6,134,000,000 ---------------- Total available-for-sale securities 24,375,000,000 Loans held for sale 1,877,000,000 Loans held in portfolio 239,627,000,000 Allowance for loan losses (8,456,000,000) ---------------- Loans held in portfolio, net 231,171,000,000 Investment in Federal Home Loan Banks 3,498,000,000 Mortgage servicing rights 6,175,000,000 Goodwill 7,284,000,000 Other assets 23,058,000,000 ---------------- Total Assets $309,731,000,000 ================ LIABILITIES Deposits: Non interest-bearing deposits $31,112,000,000 Interest-bearing deposits 150,811,000,000 ---------------- Total deposits 181,923,000,000 Federal funds purchased and commercial paper 75,000,000 Securities sold under agreements to repurchase 214,000,000 Advances from Federal Home Loan Banks 58,363,000,000 Other borrowings 30,590,000,000 Other liabilities 8,566,000,000 Minority interests 3,914,000,000 ---------------- Total Liabilities 283,645,000,000 STOCKHOLDERS' EQUITY Preferred stock 3,392,000,000 Common stock, no par value: 3,000,000,000 shares authorized, 1,705,373,797 shares issued and outstanding - Capital surplus -- common stock 12,916,000,000 Accumulated other comprehensive loss (1,079,000,000) Retained earnings 10,857,000,000 ---------------- Total stockholders' equity 26,086,000,000 ---------------- Total Liabilities and Stockholders' Equity $309,731,000,000 ================ *** In its Chapter 11 Petition, WaMu discloses $32.8 billion in *** assets and $8.1 billion in debts as of September 26, 2008. ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- SEATTLE, Washington -- September 26, 2008 -- Washington Mutual, Inc., announced that it has, together with its wholly- owned subsidiary, WMI Investment Corp., commenced voluntary cases under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Chapter 11 filings were a result of the appointment, by the Office of Thrift Supervision, of the Federal Deposit Insurance Company as receiver of Washington Mutual Bank, Washington Mutual, Inc.'s banking subsidiary, on September 25, 2008. ----------------------------------------------------------------- [00004] WASHINGTON MUTUAL INC.'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: Washington Mutual, Inc. 1301 Second Avenue Seattle, WA 98101 Bankruptcy Case No.: 08-12229 Debtor-affiliate filing separate Chapter 11 petition: Entity Case No. ------ -------- WMI Investment Corp. 08-12228 Chapter 11 Petition Date: September 26, 2008 Bankruptcy Court: District of Delaware Bankruptcy Judge: Mary F. Walrath Debtors' Counsel: Weil Gotshal & Manges LLP Debtors' Local Counsel: Mark D. Collins, Esq. collins@RLF.com Richards Layton & Finger One Rodney Square P.O. Box 551 Wilmington, DE 19899 Tel: (302) 651-7700 Fax: (302) 651-7701 Special Counsel: Simpson Thacher & Bartlett LLP ----------------------------------------------------------------- [00005] DEBTORS' LIST OF 13 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ The Bank of New York, as Junior $1,150,000,000 trustee for holders of Subordinated Junior Subordinated Debentures Debentures Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $805,000,000 trustee for holders of 4.00% Fixed Rate Notes due 2009 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Subordinate $732,000,000 successor to Harris Trust and Savings Bank, as trustee for holders of 4.625% Subordinated Notes due 2014 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $730,000,000 trustee for holders of 5.25% Fixed Rate Notes due 2017 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $504,000,000 trustee for holders of 4.2% Fixed Rate Notes due 2010 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $359,000,000 trustee for holders of $500,000,000 Floating Rate Notes due 2009 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Subordinate $452,000,000 successor to Harris Trust and Savings Bank, as trustee for holders of 8.250% Subordinated Notes due 2010 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $447,000,000 successor to Harris Trust and Savings Bank, as trustee for holders of $500,000,000 Floating Rate Notes due 2012 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Subordinate $440,000,000 trustee for holders of 7.250% Subordinated Notes due 2017 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $376,000,000 trustee for holders of 5.0% Fixed Rate Notes due 2012 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $363,000,000 trustee for holders of $450,000,000 Floating Rate Notes due 2012 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $361,000,000 trustee for holders of 5.50% Fixed Rate Notes due 2011 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 The Bank of New York, as Senior Debt $176,000,000 trustee for holders of $250,000,000 Floating Rate Notes due 2010 Corporate Trust Administration 101 Barclay St. 8W New York, NY 10286 ----------------------------------------------------------------- [00006] WAMU EFFECTS CONDITIONAL EXCHANGE OF PREFERRED SECURITIES ----------------------------------------------------------------- SEATTLE, Washington -- September 26, 2008 -- Washington Mutual, Inc. (NYSE:WM) announced that an "Exchange Event" has occurred under the applicable documents governing the following securities: -- Washington Mutual Preferred (Cayman) I Ltd. 7.25% Perpetual Non-cumulative Preferred Securities, Series A- 1 (to be exchanged into depositary shares representing Series J Perpetual Non-Cumulative Fixed Rate Preferred Stock of WMI); -- Washington Mutual Preferred (Cayman) I Ltd. 7.25% Perpetual Non-cumulative Preferred Securities, Series A- 2 (to be exchanged into depositary shares representing Series J Perpetual Non-Cumulative Fixed Rate Preferred Stock of WMI); -- Washington Mutual Preferred Funding Trust I Fixed-to- Floating Rate Perpetual Non-cumulative Trust Securities (to be exchanged into depositary shares representing Series I Perpetual Non-Cumulative Fixed-to-Floating Rate Preferred Stock of WMI); -- Washington Mutual Preferred Funding Trust II Fixed-to- Floating Rate Perpetual Non-cumulative Trust Securities (to be exchanged into depositary shares representing Series L Perpetual Non-Cumulative Fixed Rate Preferred Stock of WMI); -- Washington Mutual Preferred Funding Trust III Fixed-to- Floating Rate Perpetual Non-cumulative Trust Securities (to be exchanged into depositary shares representing Series M Perpetual Non-Cumulative Fixed Rate Preferred Stock of WMI); and -- Washington Mutual Preferred Funding Trust IV Fixed-to- Floating Rate Perpetual Non-cumulative Trust Securities (to be exchanged into depositary shares representing Series N Perpetual Non-Cumulative Fixed-to-Floating Rate Preferred Stock of WMI). In connection with the Exchange Event, WMI will effect an exchange (Conditional Exchange) of the Securities into depositary shares representing a like amount of preferred stock in WMI, as contemplated by the applicable documents governing the securities. In accordance with the terms of the documents governing the Securities, the Conditional Exchange of the Securities w[as to] occur on September 26, 2008. As of the time of the Conditional Exchange, each outstanding Security will be exchanged automatically for a like amount of newly issued Fixed Rate Depositary Shares or newly issued Fixed-to-Floating Rate Depositary Shares, as applicable, each representing a 1/1000th interest in one share of the applicable series of preferred stock of WMI. WMI will mail the notice required under the applicable documents to each holder of record of Securities within 30 days, and WMI will deliver or cause to be delivered to each such holder of record depositary receipts for the Fixed Rate Depositary Shares and Fixed-to-Floating Rate Depositary Shares upon surrender of the Securities. Until such depositary receipts are delivered or in the event such depositary receipts are not delivered, any certificates previously representing Securities will be deemed for all purposes, effective as of 8:00 AM New York time on September 26, 2008, to represent Fixed Rate Depositary Shares or Fixed-to-Floating Rate Depositary Shares, as applicable. ----------------------------------------------------------------- [00007] FITCH DOWNGRADES WASHINGTON MUTUAL'S IDR RATING TO 'C' ----------------------------------------------------------------- NEW YORK, New York -- September 26, 2008 -- With most of Washington Mutual Bank's assets now owned by JP Morgan Chase (JPM), how much available cash remaining at WaMu's holding company to fund potential recoveries for the senior debt holders remains to be seen, according to Fitch Ratings, which downgraded WaMu's Issuer Default Rating (IDR) to 'C' from 'B-', reflecting the likelihood of default. The ratings are also placed on Rating Watch Negative. A complete list of affected ratings follows the end of the press release. Last night, the Office of Thrift Supervision closed Washington Mutual Bank (WMB), citing significant deposit outflows since September 15, 2008. The FDIC was named receiver. Most of the bank's assets, including its loans, all of its deposits and select other liabilities were purchased from the FDIC by JPMorgan Chase Bank, NA last night. Washington Mutual Bank, which owned Washington Mutual fsb, was the only significant operating subsidiary of Washington Mutual, Inc. (WMI). It is unclear which resources, if any, remain available to satisfy claims of WMB debtholders. Washington Mutual, Inc., remains outside this transaction although it is anticipated that it will liquidate near term. Fitch does not expect WMI preferred and subordinated debt holders to see recoveries. Although WMI had several billion in cash a short time ago, it is unclear how much of that cash remains at the holding company and might be available to fund potential recoveries for the senior debt holders. As a result of the JPM transaction, long-term and short-term deposits are now obligations of JPMorgan Chase Bank, NA and ratings have been aligned with those of the deposits of JPMorgan Chase Bank, NA. Washington Mutual Bank's obligations under its mortgage bonds have been assumed by JPMorgan Chase Bank, NA. These mortgage bonds are owned by WM Covered Bond Program (WMCBP) and are securing WMCBP's covered bonds. A separate rating action commentary on WMCBP outstanding debt will follow. Fitch has taken the following rating actions on WaMu and subsidiaries: Washington Mutual Inc. --Long-term IDR downgraded to 'C' from 'B-'; --Senior debt downgraded to 'C' from 'B-'; --Short-term IDR downgraded to 'C' from 'B'; --Short-term debt to downgraded 'C' from 'B'; --Subordinated debt to downgraded 'C' from 'CCC'; --Preferred stock to downgraded 'C' from 'CC'; --Individual remains at 'E'. Washington Mutual Bank --Long-term IDR withdrawn (formerly 'BB-'); --Short-term IDR withdrawn (formerly 'B'); --Support rating withdrawn (formerly 3); --Support floor withdrawn (formerly 'BB-'); --Senior debt downgraded to 'C'; --Subordinated debt downgraded to 'C'; --Individual downgraded to 'F' from 'D/E'. Bank United FSB --Subordinated debt downgraded to 'C' from 'B-'. Bank United Corp. --Subordinated debt downgraded to 'C' from 'CCC'. Providian Financial Corp --Senior debt downgraded to 'C' from 'B-'. Washington Mutual Preferred Funding (Cayman) I Ltd. Washington Mutual Preferred Funding Trust I (Delaware) Washington Mutual Preferred Funding Trust II Washington Mutual Preferred Funding Trust III Washington Mutual Preferred Funding Trust IV --REIT preferred downgraded to 'C' from 'CC'. Washington Mutual Capital I Providian Capital I --Trust preferred downgraded to 'C' from 'CC'. Washington Mutual Inc. --Support remains at '5'; --Support Floor remains at 'NF'. ----------------------------------------------------------------- [00008] S&P RATES WASHINGTON MUTUAL NEGATIVE ON CREDITWATCH ----------------------------------------------------------------- NEW YORK, New York -- September 26, 2008 -- Standard & Poor's Ratings Services today placed all of its servicer rankings on Washington Mutual Bank, a subsidiary of Washington Mutual Inc., on CreditWatch with negative implications. The CreditWatch placements affect: -- Our ABOVE AVERAGE residential prime ranking; -- Our ABOVE AVERAGE residential subprime ranking; and -- Our AVERAGE commercial mortgage primary, master, and special servicer rankings. The CreditWatch negative placements follow the sale of Washington Mutual Inc., and its subsidiary bank to JP Morgan Chase and reflect the uncertainties that the sale presents regarding JP Morgan Chase's plans for the Washington Mutual servicing operations. Given JP Morgan Chase's quick acquisition of Washington Mutual, it is currently difficult to assess what the near-term and ultimate impact, if any, will be to the loan servicing businesses of Washington Mutual Bank. However, Standard & Poor's will continue to monitor the situation and comment as developments unfold. On September 26, 2008, Standard & Poor's lowered its credit rating on Washington Mutual, Inc. to 'D' from 'CCC', and withdrew its ratings on Washington Mutual Bank. In addition, Washington Mutual Bank's servicing operations are fully operational and therefore the company remains on Standard & Poor's Select Servicer List. ----------------------------------------------------------------- [00009] MOODY'S DOWNGRADES WAMU'S SENIOR DEBT RATING TO "Caa2" ----------------------------------------------------------------- Moody's Investors Service downgraded Washington Mutual Inc.'s senior debt rating to Caa2 from Ba2, subordinated debt rating to C from Ba3 and preferred rating to C from Ca. Washington Mutual Bank's senior unsecured bank notes were downgraded to Ca from Baa3 and subordinate bank notes to C from Ba1. The senior debt ratings of Washington Mutual Inc. and Washington Mutual Bank are under review for downgrade. The rating actions follow the purchase of substantially all of the assets and the assumption of all the deposits and certain other liabilities of the thrift subsidiaries of Washington Mutual Inc. by JP Morgan Chase Bank N.A. (JPM, rated Aaa for deposits) in a transaction facilitated by the Federal Deposit Insurance Corporation. Immediately prior to the purchase, the Office of Thrift Supervision closed Washington Mutual Bank and appointed the FDIC as the receiver. JPM acquired $296 billion in tangible assets and assumed $265 billion in deposits and other liabilities, including FHLB borrowings, covered bonds, and qualified financial contracts for a payment of $1.9 billion. JPM did not assume the senior bank notes or subordinate bank notes of Washington Mutual Bank. JPM also did not acquire any assets or assume any liabilities of Washington Mutual Inc. Moody's believes that assets available to satisfy obligations not assumed by JPM are limited to the $1.9 billion payment by JPM to the FDIC and approximately $4 billion of cash held at Washington Mutual Inc. Moody's expects that the $1.9 billion payment by JPM will be used to partially repay Washington Mutual Bank's remaining senior bank notes of approximately $6.0 billion. However, it is uncertain at this time if the $4.0 billion of cash held at Washington Mutual Inc. will be fully available for the benefit of Washington Mutual Inc. creditors, or if some of this amount will benefit Washington Mutual Bank senior creditors. Moody's expects little if any recoveries for subordinated debt and preferred holders at either the thrift or the holding company. The C rating on subordinate debt and preferred shares reflects near complete losses for these creditors. The Caa2 rating on Washington Mutual Inc. senior debt versus the Ca rating on Washington Mutual Bank senior debt reflects Moody's view that recoveries on senior debt at the holding company may be higher than recoveries for senior debt at the bank. However, there is considerable uncertainty regarding this outcome, and therefore the senior debt ratings at both entities remain under review for downgrade. Washington Mutual Inc. could face claims from the FDIC as receiver for the apparent capital shortfall at the thrift, which could reduce recoveries for holding company creditors. At the same time, the FDIC could face claims from Washington Mutual Bank senior note holders for unequal treatment of senior and general creditors, which could increase recoveries for the senior creditors whose obligations were not assumed by JPM. The bank financial strength ratings of Washington Mutual Bank and Washington Mutual Bank FSB, as well as the ratings of both thrifts for deposits, issuer and other senior obligations were withdrawn. The withdrawal reflects the closing of both institutions, and the assumptions of all of their outstanding non-debt obligations by JPM. Downgrades: Issuer: Bank United -- Subordinate Regular Bond/Debenture, Downgraded to C from Ba1 Issuer: Providian Capital I -- Preferred Stock Preferred Stock, Downgraded to C from Ba3 Issuer: Providian Financial Corporation -- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to Caa2 from Ba2 Issuer: Washington Mutual Bank -- Multiple Seniority Bank Note Program, Downgraded to a range of C to Ca from a range of Ba1 to Baa3 -- Subordinate Regular Bond/Debenture, Downgraded to C from Ba1 -- Senior Unsecured Regular Bond/Debenture, Downgraded to Ca from Baa3 Issuer: Washington Mutual Capital I -- Preferred Stock Preferred Stock, Downgraded to C from Ba3 Issuer: Washington Mutual Capital Trust 2001 -- Preferred Stock Preferred Stock, Downgraded to C from Ba3 Issuer: Washington Mutual Pfd Funding (Cayman) I Ltd -- Preferred Stock Preferred Stock, Downgraded to C from Ca Issuer: Washington Mutual Preferred Funding Trust I -- Preferred Stock Preferred Stock, Downgraded to C from Ca Issuer: Washington Mutual Preferred Funding Trust II -- Preferred Stock Preferred Stock, Downgraded to C from Ca Issuer: Washington Mutual Preferred Funding Trust III -- Preferred Stock Preferred Stock, Downgraded to C from Ca Issuer: Washington Mutual Preferred Funding Trust IV -- Preferred Stock Preferred Stock, Downgraded to C from Ca Issuer: Washington Mutual, Inc. -- Multiple Seniority Shelf, Downgraded to a range of (P)C to (P)Caa2 from a range of (P)Ba3 to (P)Ba2 -- Preferred Stock Preferred Stock, Downgraded to C from Ca -- Subordinate Regular Bond/Debenture, Downgraded to C from Ba3 -- Senior Subordinated Regular Bond/Debenture, Downgraded to C from Ba3 -- Senior Unsecured Regular Bond/Debenture, Downgraded to Caa2 from Ba2 Outlook Actions: Issuer: Washington Mutual Bank FSB -- Outlook, Changed To Rating Withdrawn From Rating Under Review Withdrawals: Issuer: Washington Mutual Bank -- Bank Financial Strength Rating, Withdrawn, previously rated E -- Issuer Rating, Withdrawn, previously rated Baa3 -- OSO Rating, Withdrawn, previously rated P-3 -- Deposit Rating, Withdrawn, previously rated P-3 -- OSO Senior Unsecured OSO Rating, Withdrawn, previously rated Baa3 -- Multiple Seniority Bank Note Program, Withdrawn, previously rated P-3 -- Senior Unsecured Deposit Note/Takedown, Withdrawn, previously rated Baa3 -- Senior Unsecured Deposit Rating, Withdrawn, previously rated Baa3 Issuer: Washington Mutual Bank FSB -- Bank Financial Strength Rating, Withdrawn, previously rated E -- Issuer Rating, Withdrawn, previously rated Baa3 -- OSO Rating, Withdrawn, previously rated P-3 -- Deposit Rating, Withdrawn, previously rated P-3 -- OSO Senior Unsecured OSO Rating, Withdrawn, previously rated Baa3 -- Senior Unsecured Deposit Rating, Withdrawn, previously rated Baa3 ----------------------------------------------------------------- [00010] AEGON NV HAS $181-MIL. EXPOSURE TO WASHINGTON MUTUAL ----------------------------------------------------------------- Aegon NV, a life insurance and pension provider based in The Hague, Netherlands, disclosed an exposure of EUR125,000,000 or US$181,000,000, to Washington Mutual, Inc. In a press release dated September 29, 2008, Aegon disclosed that the amount "includes credit default swaps-related exposure" to WaMu. "Any effect of credit losses on Aegon's excess capital and net income will be substantially lower as a result of a variety of factors, including taxes and recovery values," according to the statement. During 2008, Aegon has actively lowered its exposure to WaMu by approximately 47%. Aegon doesn't hold common equity in WaMu. Aegon also owns the U.S. insurer Transamerica Corp., Bloomberg News notes. ----------------------------------------------------------------- [00011] WAMU TO BE REPLACED BY FLOWSERVE CORP. IN S&P 500 INDEX ----------------------------------------------------------------- Standard & Poor's said that Washington Mutual Inc. will be replaced by Flowserve Corp. in the benchmark S&P 500 Index after the close of trading on September 29, 2008, CNNMoney.com reported. Washington Mutual Bank, Washington Mutual Inc.'s banking subsidiary, was seized by the Federal Deposit Insurance Corp. last September 25, 2008. The FDIC then sold the Bank's assets to JPMorgan Chase & Co. for $1.9 billion. ----------------------------------------------------------------- [00012] JUDGE WALRATH SCHEDULES OCTOBER 3 STATUS CONFERENCE ----------------------------------------------------------------- Sua sponte, the Honorable Mary F. Walrath entered an order this afternoon directing that a Status Conference will be held before the Court on October 3, 2008, at 9:30 a.m. *** End of Issue No. 1 ***