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Originally published Sunday, February 1, 2009 at 12:00 AM


Sunday Buzz

Traders can still gamble on WaMu

Feeling lucky? You could buy a $1 Powerball ticket. Or, for around $6, you could gamble on whether there's any life left in Washington Mutual's...

Feeling lucky? You could buy a $1 Powerball ticket. Or, for around $6, you could gamble on whether there's any life left in Washington Mutual's corporate husk.

Six bucks is what the obscure securities linked to WaMu's holding company — now in Chapter 11 bankruptcy proceedings in Delaware — were trading at last week.

The securities, we should note, aren't WaMu common stock. That stock is still trading, as WAMUQ, for pennies a share, reflecting the slender chance that the bankruptcy proceedings will leave common shareholders anything more than a thick stack of legal papers.

But WaMu's "trust preferred income equity redeemable securities," which are quoted under the symbol WAHUQ, are another matter. Originally issued in 2001, they are debt instruments that, in theory, entitle the holders to up to $50 per unit. More to the point, owners of WAHUQ stand in front of WaMu's preferred and common shareholders in the bankruptcy (though behind senior debtholders), when it comes to collecting any of the remaining assets.

Handicapping the prospect of any recovery has sent WAHUQ securities as low as 60 cents and as high as $6.25 in the past three months.

Since WaMu's holding company filed for bankruptcy last fall, proceedings have largely involved sorting out who owns which assets and who owes how much to whom. Nonetheless, it seems the holding company will have some assets to distribute: It reported $7.1 billion in assets as of Nov. 30, including nearly $4.3 billion in cash and equivalents.

The holding company also is battling the IRS for a hefty tax refund — $2 billion or more, said Kevin Starke, an analyst who's following the bankruptcy for CRT Capital Group of Stamford, Conn.

Much of any refund, Starke said, probably will go to JPMorgan Chase, which owns WaMu's former banking operations and is converting them to the Chase brand. But some refund money — possibly around 20 percent — likely will stay with the holding company and be available for distribution to creditors, he said.

Senior noteholders, who are owed around $4.1 billion, are first in line to get repaid, followed by holders of around $1.6 billion in senior subordinated debt. The WAHUQ holders are next in line.

"So, if there's more than $5.7 billion in the (bankruptcy) estate when a plan of reorganization is confirmed, they will get whatever is left," Starke said. "It's kind of like a lottery ticket on the WaMu bankruptcy case."

— Drew DeSilver

Gates ups his stake in garbage giant


Bill Gates has doubled up on garbage giant Republic Services, keeping his investment firm a top shareholder after the disposal company compacted one of its main rivals.

Gates' Cascade Investment spent more than $100 million just since mid-January to build his stake to nearly 44.6 million shares (counting 1.35 million owned by the Bill & Melinda Gates Foundation), according to regulatory filings this past week. That's more than 11 percent of the nation's second-largest trash collector.

Republic in December absorbed rival Allied Waste in a deal that gave Allied shareholders, led by the Blackstone Group private-equity fund, 52 percent of the combined companies.

Gates, who's owned a chunk of Republic since 2000 or earlier, controlled 28.5 million shares, or more than 15 percent, last summer before the December merger with Allied diluted his stake.

Since then he's steadily added to his holdings, now worth about $1.15 billion at Friday's closing price of $25.86.

Last Thursday's regulatory filings appear to contain one surprise: a math error.

The filing detailing the bulk of the recent purchases says that "During the period January 13, 2009, through January 26, 2009, Cascade purchased 3,909,638 shares of [Republic] Common Stock for an aggregate purchase price of $448,645,436.06."

That suggests Gates paid about $114 per share — and even gazillionaires don't pay four times the market price for stock.

Later in that same Securities and Exchange Commission filing, made by Gates investment manager Michael Larson, an itemized list of trades shows the total price for those shares actually was about $97,263,823. (Cascade didn't respond to a request for comment.)

Somehow that brings to mind the old programmer's saying, "Garbage in, garbage out."

— Rami Grunbaum

Comments? Send them to Rami Grunbaum: or 206-464-8541

Copyright © 2009 The Seattle Times Company

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