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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: tandav who wrote (31680)	8/1/2008 8:26:57 PM
From: E_K_S	Respond to of 78567

Hi Tandav - Worst case is that the common becomes worthless. I believe the odds are small especially after the news today that a huge hedge fund invested $7.2 B in the common. This type of investment would not have been made even if there was a low probability of any type of Chapter 7. I suppose this investor also bought into the bonds and preferred shares to spread out their risk . Perhaps that is the reason for those "mandatory" call provisions in the Series "S" & "T" preferred shares which allows the company (or acquirer) to make holders convert to the common shares. With such a large investment by one investor, their exit plan might eventually include an acquisition. For now, WM just has a very large "foreign" partner that owns at least 6% of WM common (they probably own much more but less than 20%). Friday, August 1, 2008 - 10:28 AM EDT U.K. hedge fund buys 6 percent stake in Washington Mutual atlanta.bizjournals.com The best preferred IMO is the series "R" but it continues to sell at a very deep discount from the original issue, now yielding somewhere near 16%. At this effective rate, the market is signaling very high risk. The dividend could be discontinued but is first in line to be paid before the common. It is non-cumulative so all dividends due (to date) must be paid first before any common dividends are made. I like that it is a Perpetual Convertible (convertible any time at the holder's option) and has no stated maturity. That way if WM can work out their problem over time, this issue will increase in value. Perhaps getting back to the face value of $1000 from when it was originally issued on 12/11/07 (http://www.secinfo.com/dr643.uCc.htm ). Based on the effective yield, your initial investment will be returned in dividends in 4.8 years. That said, a Chapter 7 would probably make this worthless less any dividends received. With all of this in mind, there is a huge value opportunity IF WM survives. I am willing to take the risk but only for a few units. EKS