Wachovia to get $7B investment
By IEVA M. AUGSTUMS, AP Business Writer
Edit...chit l just deposited some $$$ my home bank.
Wachovia Corp. said Sunday it will move up the release of its first-quarter financial results, an announcement that closely followed a report that the nation's fourth-largest bank is about to get a multibillion-dollar cash infusion.
The Charlotte-based bank, which is struggling to digest its admittedly ill-timed purchase of mortgage lender Golden West Financial Corp., will report before the market opens Monday. The bank had been set to report its results Friday.
The change was announced shortly after The Wall Street Journal reported Wachovia was working on the final terms of a deal that would bring in between $6 billion and $7 billion of capital. In return, the investor group would get shares priced at roughly $23 to $24 apiece — about an 18 percent discount to Wachovia's closing share price Friday of $27.81.
Wachovia's shares have sunk 48 percent in the past year, dropping from a 52-week high of nearly $57 as the housing slump and credit crisis pounded the nation's leading banks and financial service companies.
The Journal cited people familiar with the matter and said officials at Wachovia could not be reached for comment. Wachovia officials did not immediately return calls from The Associated Press.
The cash infusion would be Wachovia's second of the year. In January and early February, Wachovia added $8.3 billion in capital by issuing preferred stock and other securities to investors.
"These securities strengthened our regulatory capital position and provide greater certainty that we are well positioned in 2008," chief executive Ken Thompson wrote in a letter to shareholders in February.
Wachovia's troubles with the housing slump have been compounded by its 2006 acquisition of California-based Golden West, a $24 billion deal whose timing, Thompson has admitted, "was not the best."
"With the benefit of hindsight, it is clear that the timing was poor for this expansion in the mortgage business," Thompson wrote in February.
Golden West's loans were concentrated in California, one of the hardest-hit housing markets in the U.S. Wachovia said this month that it was considering halting the making of loans, including its signature Pick-A-Payment mortgage loans, in 17 California counties heavily affected by falling home prices and rising foreclosures.
Last week, it announced a new set of lending guidelines that appeared to be a broader step to help manage losses at the bank.
"The problem is they keep doing deals, and they hit a deal that didn't work," said Nancy Bush, an independent analyst with NAB Research LLC in Aiken, S.C. "A capital infusion may not be the answer. There needs to be some restructuring."
Wachovia said in February it expects to set aside more money for bad loans, although it did not give a specific amount. The company took more than $3.2 billion in write-downs in the second half of 2007, losses tied mostly to the housing market and the falling value of its collateralized debt obligations. CDOs are a kind of security often backed by subprime mortgage loans — or those given to customers with poor credit histories.
In last year's fourth quarter, Wachovia's net income plunged 98 percent because of a $1.7 billion write-down of some holdings — primarily assets backed by subprime mortgages — and $1.5 billion set aside to cover bad loans.
The Journal said Wachovia's cash infusion is similar in structure to the $7 billion in new capital Washington Mutual Inc. obtained last week from an investment group led by private equity group TPG.
