jaybird249 Tuesday, 09/30/08 04:31:43 PM Re: None Post # of 472440 MONSTROUS NEWS: WAMUQ $1 soon? Forum: Wall Street Pit (See more WM msgs) NEW YORK (Dow Jones)--The senior and subordinated holding company bonds of Washington Mutual soared in value Tuesday after the firm confirmed it has more cash than previously thought that can go towards paying off holders of this debt as part of the company's restructuring. In a filing with the Securities and Exchange Commission (SEC), Washington Mutual confirmed that it and its non-bank subsidiaries had approximately $5 billion of cash on deposit with Washington Mutual Bank and its bank subsidiary, Washington Mutual Bank fsb. "This cash can go to paying off bondholders as part of the company's bankruptcy restructuring," said Guy LeBas, fixed income strategist at Janney Montgomery Scott. The confirmation has seen Washington Mutual's bonds rally sharply. LeBas said the thrift's senior unsecured bonds were bid at 67 cents on the dollar Tuesday morning. This implies investors could now be looking at a significantly higher recovery of 88 cents on the dollar on the senior debt, LeBas calculated. This is assuming a 20% discount and an 18 month timeframe to resolution of the bankruptcy, he said. The senior bonds closed last week at around 42 cents on the dollar. The subordinated bonds meanwhile are seen trading in the mid to high teens against a mere four cents on the dollar late Friday, another portfolio manager said. Recovery on the subordinated debt is a little murkier, LeBas said, because it depends a lot more on the goodwill of Washington Mutual's other creditors. He estimates that holders of this debt could be looking at recouping around 10 cents on the dollar. JP Morgan Chase & Co. (JPM) announced late Thursday it will acquire all deposits, assets and certain liabilities of Washington Mutual's banking operations from the FDIC. Washington Mutual collapsed under a surge of deposit withdrawals. The deal involves JP Morgan acquiring Washington Mutual's branches, deposits and its loan assets. JP Morgan, however, won't take on any of Washington Mutual's unsecured debt or preferred stock or any of the assets of liabilities of the holding company nor the holding company's non-bank subsidiaries. Initial estimates from CreditSights last week put the cash balance at the holding company at about $2.8 billion. Such a small cash balance would have been nowhere near enough to ensure that the bondholders would fully recover their investment in the firm. Indeed, Washington Mutual has about $5.7 billion of unsecured bonds, including $4.1 billion of senior debt and $1.6 billion of subordinated debt, according to CreditSights. As a result, market participants last week were estimating that the recovery prospects for senior and subordinated bondholders looked very bleak indeed. Senior unsecured bondholders could have been looking at a recovery on their investment of between $0.25-$0.30, while subordinated debt holders may end up with very little at all, participants said at the time. -By Kate Haywood and Romy varghese, Dow Jones Newswires; 201-938-2348; [email protected] Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=ssOOQJa0bVq17iQhEhuI6g%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires 09-30-08 1620ET Copyright (c) 2008 Dow Jones & Company, Inc.