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Bloomberg – The Bush administration will invest about $125 billion in nine of the biggest U.S. banks, including Citigroup Inc. and Goldman Sachs Group Inc., in the government’s latest attempt to shore up confidence in the financial system.
The proposed cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan.
New York (HedgeCo.Net) – The tug of war over Wachovia continued yesterday, as Citigroup and Wells Fargo tried to reach an agreement over the future of the Charlotte-based bank.
According to transcripts from a teleconference held between U.S. District Judge Lewis Kaplan and the companies, a solution might be in the cards that entails Wachovia being split between Citigroup and Wells Fargo.
"There are negotiations between Wells Fargo and Citi about a possible grand solution that would preserve the shareholder value for Wachovia as represented by the Wells Fargo deal, but that would involve not a single choice between Citigroup and Wells Fargo," said David Boies, who represents Wachovia.
For now, both Citigroup and Wells Fargo extended a cease-fire that was originally ordered on Monday by Federal Reserve Officials for fears of market retributions.
Citigroup was believed to have a lock on Wachovia, after their $2.1 billion bid bought them the branch system of the troubled bank. Though not the best deal for Wachovia, having their assets seized by the FDIC was not a viable alternative. After they accepted the proposal, Wells Fargo came to the table and offered an astounding $15.1 billion for the entirety of Wachovia, sending Citigroup into a rage and forcing the issue of an exclusivity agreement.
Jane Sherburne, who also represents Wachovia, hopes that they can “facilitate in whatever way we can a negotiated settlement of this matter without escalating the issues in a litigation setting.”
In addition to the acquisation concerns, Citigroup is also going after Wells Fargo, seeking $60 billion in damages for interferring with the deal.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – In an emergency hearing yesterday, U.S. District Judge John Koeltl left the door open for Wachovia to consider better offers, saying the law “appears” to permit bids from other potential buyers. This decision comes at a time when Wells Fargo is considering a $15 billion proposal, a substantial increase from Citigroup’s $2 billion bid for the Charlotte-based bank.
“What was an institution that needed assistance now has another transaction it views even more favorably,” said Judge Koeltl at the hearing.
Citigroup, who placed a bid for the branch system of Wachovia last month, is looking to the future while trying to move past over $60 billion in losses stemming from the subprime fallout and the credit crisis that ensued.
While Citigroup did have an exclusivity agreement with Wachovia that would forbid the bank from speaking to any other potential buyers, lawyers for Wachovia argue that the new $700 billion government bailout plan permits Wachovia to dabble in other offers.
“We are entitled as a matter of law to a judgment that Wachovia is permitted to go forward with Wells Fargo,” lawyers for Wachovia told the judge. “This is a matter of considerable urgency.”
Wachovia has stated they believe a deal with Wells Fargo would be in the interest of investors and shareholders since Wells Fargo does not need government assistance and was not hit nearly as hard by the mortgage crisis. While Citigroup’s bid included only the branches of Wachovia, Wells Fargo would be purchasing the entire company.
Judge Koeltl scheduled a hearing for October 7th, in which another judge will preside and determine the next course of action.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – JPMorgan Chase & Co. has purchased Washington Mutual’s branch network for $1.9 billion, making them the largest U.S. bank by deposits. The deal was encouraged by the U.S. government after consumers withdrew over $16 billion from the nation’s largest savings and loan in the latter half of September.
WaMu was having trouble finding a buyer after the Treasury’s proposed $700 billion bailout package created reluctance among would-be investors. Others companies said to have been considering an offer included Citigroup and Wells Fargo.
Many believed that WaMu was next in line to sink thanks to over $180 billion in outstanding mortgage-related loans and the paranoia of a pending liquidity crunch. On top of that, Standard & Poors once again cut WaMu’s ratings to CCC from BB-, though the company was quick to quell any fears associated with the downgrade.
"Washington Mutual Bank’s deposit rating from Standard & Poor’s continues to be investment grade and it is important to note that Standard & Poor’s rating actions do not affect the safety of customer deposits, which are insured up to the limits allowed by the FDIC," said WaMu in a recent statement.
Washington Mutual continued to deny rumors of any problems. The bank recently stated they had over $50 billion in liquidity despite being hit hard by the subprime mortgage fallout.
It was just a few months ago that WaMu rejected a bid from JPMorgan for about $4 a share, even after JPMorgan urged the bank to consider a deal before the economy got worse.
JPMorgan, who also acquired Bear Stearns earlier this year, will not inherit WaMu’s liabilities, including claims by shareholders and subordinated and senior debt holders. By purchasing WaMu, Chase can now increase their presence on the West Coast and in Florida.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
