Washington Mutual's Capital Deal: The Good And The Bad

Washington Mutual did it, raising $7 b in capital($2 b more than had been discussed yesterday).

TPG will purchase $2 b in newly issued securities. They also sold 176 m shares of common at $8.75 a share (closed at $13.15 yesterday), and issued $5.5 b in convertible preferred securities, along with warrants. Slashing quarterly dividend to $0.01 a share.

The good news: this makes it much more likely the company will survive.

The bad news: disastrous for shareholders, not only is it dilutive (100 percent!) but the terms were weaker than expected.

However, traders have noted to me that WM was not negotiating from a position of strength. This may be a negative for National City --the self proclaimed weak link in the financial chain.

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