One of the United Kingdom's largest hedge funds has approached Washington Mutual Inc. and offered to participate in any consortium looking to recapitalize the mortgage lender, a person familiar with the matter said.
This week, London-based Toscafund Asset Management LLP approached the board of Washington Mutual to offer to invest its own money and help any consortium to recapitalize the lender, this person said. Tosca, which has about $8 billion under management and is part of Old Oak Holdings Ltd., a group with $12 billion under management, already controls a sizable share of the U.S. firm.
WaMu, the largest U.S. savings-and-loan institution, has been battered by the housing crisis and has already taken steps to bolster its capital by cutting its dividend, slashing jobs and selling $3.7 billion in preferred shares. WaMu shares are down more than 70% in the past year, in the wake of credit losses, foreclosures and bad bets in the subprime market. In the fourth quarter, WaMu had a $1.87 billion loss fueled by a sharp increase in its reserve for loan-related losses.
But WaMu shares have risen in recent days on speculation that the Seattle thrift may be nearing a deal for a capital infusion; Goldman Sachs Group Inc. was among the rumored firms. In 4 p.m. New York Stock Exchange composite trading, WaMu shares fell 24 cents, or 2%, to $11.64, but had risen to $12.99 intraday.
WaMu declined to comment. Goldman Sachs also declined to comment.
Under pressure from banking regulators who are worried about the adequacy of WaMu's capital levels, the company recently has been reaching out to investors in the U.S. and overseas about getting an infusion of capital, according to people familiar with the matter. The discussions have been progressing this week and an announcement of an infusion could come as early as next week, one person said.
Tosca is concerned that another approach to recapitalize WaMu is imminent and may lead to the dilution of its stake, according to the person familiar with the matter. Tosca began investing in the company last year.
Tosca believes it and other leading shareholders should be given the chance to help recapitalize Washington Mutual, that person says, but so far WaMu hasn't warmed to the overture. Tosca is hoping its move may act as a rallying cry to other investors afraid that they would be diluted, this person said.
Tosca was founded in 1999 by Martin Hughes, a former banking analyst who once worked for hedge-fund legend Julian Robertson. It specializes in investments in financial firms and was a large holder in Dutch bank ABN Amro Holding NV before it was taken over by a consortium of banks last year.
