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Washington Mutual's Covered Bonds

Bergstresser, Daniel B. ; Greenwood, Robin ; Quinn, James

Reference: HBS-209093-E
Year: 2008
Number of pages: 25
Geographic Setting: United States
Publication Date: Mar 13, 2009
Fecha de edición: Nov 28, 2016
Source: HBSP (USA)
Type of Document: Case
Industry Setting: Banking & credit;Banking;Credit

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Description

Washington Mutual issued 6 billion Euro of covered bonds in 2006. The objective of the case is to ask whether these bonds are mispriced in late 2008. The case is set in September 2008, and Washington Mutual is facing considerable distress due to mounting losses on its mortgage portfolio. Following investment bank Lehman Brother's Chapter 11 bankruptcy protection filing in mid September, the price of Washington Mutual's covered bonds has fallen to 75 per 100 of face value. As these bonds are overcollateralized, the case asks students to evaluate the underlying collateral portfolio in the event of liquidation, as well as assessing the likelihood of different outcomes. The case takes place during a period of considerable uncertainty in the global capital markets.

Keywords

Balance sheets Bonds Capital markets Financial analysis Investments Liquidity Mortgages