David Bonderman must be steaming.
In less than six months, the billionaire co-founder of TPG Capital has watched his firm’s $2 billion investment in Washington Mutual steadily dwindle.
WaMu is now desperately trying to sell itself or raise additional capital before federal regulators seize control of the nation’s largest savings and loan and shareholders, including TPG, end up with nothing.
If, as many analysts predict, WaMu can’t find a buyer willing to pay something for the equity, TPG’s investment will be completely wiped out – triggering a massive loss for one of the most-respected investment firms in world.
Investors in TPG’s various funds will feel the most pain. The Washington State Investment Board, which controls retirement and public funds totaling $52 billion, has $1.5 billion invested in two TPG funds that are part of the WaMu investment.
Other investors include the New York State Common Retirement System, the New Jersey State Investment Council and the Pennsylvania Public Schools Employees Retirement System.
It’s also a black eye for the high-profile Bonderman, who splits his time between mansions in Texas and Colorado. He’s worth $3.3 billion and five years ago celebrated his 60th birthday with a $7 million party in Las Vegas that featured a performance by The Rolling Stones.
Convinced by then-CEO Kerry Killinger that WaMu could survive the current crisis despite the thrift’s exposure to toxic mortgage assets, Bonderman led a group of dozens of investors who injected $7 billion into the company in April.
TPG received a $50 million placement fee from the company for gathering the other investors.
Almost immediately, the bet began to sour as credit rating agencies downgraded WaMu’s debt and its stock price plummeted. WaMu shares fell yesterday 94 cents to $2.26 a share.
TPG spread its $2 billion equity investment throughout six funds all with WaMu exposure, including $475 million in each of its most recent buyout funds, $400 million in a new fund targeted for investments in financial services and $250 million in its hedge fund affiliate TPG-Axon, according to a document obtained by The Post.
“We are enthusiastic about the opportunity to invest in an undervalued and attractive deposit franchise, particularly in a security with meaningful downside protection,” TPG said in a May investor letter.
Last week, the firm agreed to waive that downside protection in order to pave the way for a potential takeover of WaMu.
Despite the blow to TPG’s reputation, investors are unlikely to abandon the firm, which has achieved annual returns of over 55 percent in the last decade.