Moody's downgrades Washington Mutual Bank to junk

Moody's Investors Service said it downgraded Washington Mutual Bank's senior unsecured bonds to Ca from Baa3 and its subordinated bonds to C from Ba1. The Baa3 issuer rating was withdrawn.

In addition, the agency lowered Washington Mutual, Inc.'s senior unsecured bonds to Caa2 from Ba2, its senior subordinated bonds and subordinated bonds to C from Ba3 and its preferred stock to C from Ca.

The senior debt ratings of Washington Mutual Bank and WaMu and are under review for downgrade.

The downgrade follows JPMorgan Chase Bank, NA's purchase of substantially all of the assets of WaMu's thrift subsidiaries and the assumption of all their deposits and some other liabilities. Immediately prior to the purchase, the Office of Thrift Supervision closed Washington Mutual Bank and appointed the Federal Deposit Insurance Corp. as the receiver.

JPMorgan did not assume Washington Mutual Bank's senior or subordinated notes.

The Ca rating on Washington Mutual Bank's senior debt versus the Caa2 rating on WaMu's senior debt reflects Moody's view that recoveries on senior debt at the holding company may be higher than recoveries for senior debt at the bank. However, the agency said the ratings remain under review for downgrade because there is considerable uncertainty regarding this outcome.

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