Alert April 08, 2008

OTS Approves Rebuttal of Control for TPG Investment in Washington Mutual

By Order No. 2008-08 (“Order 2008-08”), the OTS approved the Rebuttal of Control which TPG-related entities (collectively, the “TPG Group”) filed with respect to the TPG Group’s investment in Washington Mutual, Inc. (“WaMu”).  The TPG Group acquired preferred stock of WaMu, as well as common stock and warrants in the company.  The preferred stock is mandatorily convertible into common stock upon certain events which are anticipated to occur within 3 months after the investment.  As a result of the acquisition, after the conversion the TPG Group will become the largest common shareholder of WaMu.

In support of its Rebuttal of Control request, the TPG Group represented that it would acquire the securities for investment purposes only (and not with a purpose of control) and would not acquire more than 25 percent of any class of voting securities of WaMu.  The TPG Group’s rebuttal of control agreement generally conforms to the standard OTS form.  However, in addition to one member of WaMu’s board, the TPG Group may appoint an observer to attend the WaMu board meetings, although the observer may neither speak nor vote at the meetings.  In approving the Rebuttal of Control, Order 2008-08 noted that the presence of the observer under these circumstances “does not contravene the purposes of a rebuttal of control.”