Washington Mutual's Covered Bonds

Posted: 11 Nov 2009

See all articles by Daniel Bergstresser

Daniel Bergstresser

Brandeis International Business School

Robin M. Greenwood

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

James Quinn

Harvard University - Business School (HBS)

Date Written: October 22, 2009

Abstract

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.

Suggested Citation

Bergstresser, Daniel B. and Greenwood, Robin M. and Quinn, James, Washington Mutual's Covered Bonds (October 22, 2009). HBS Case No. 209-093, Harvard Business School Finance Unit, Available at SSRN: https://ssrn.com/abstract=1502791

Daniel B. Bergstresser (Contact Author)

Brandeis International Business School ( email )

Waltham, MA 02454
United States
6174162324 (Phone)

Robin M. Greenwood

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6979 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James Quinn

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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