DEALTALK-China forex watchdog burnt by WaMu collapse

martes 30 de diciembre de 2008 11:57 CET

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By George Chen, Asia Private Equity Correspondent

HONG KONG Dec 30 (Reuters) - China's foreign exchange watchdog, the State Administration of Foreign Exchange, will cut back on overseas equity buys next year after suffering major losses on the collapse of U.S. lender Washington Mutual, according to sources.

Earlier this year, SAFE, which controls around $2 trillion of China's foreign reserves, agreed to invest up to $2.5 billion in fund of U.S. private equity giant TPG [TPG.UL] -- its first foray into a foreign private equity fund, people close to the situation told Reuters.

In April, TPG, one of the world's largest private equity firms, led a $7 billion investment in Washington Mutual to help the troubled lender boost its capital.

TPG put money into WaMu through several of its funds, including one SAFE invested in, said the sources who declined to be identified due to the sensitive nature of the deal.

Just five months later, WaMu, the largest U.S. savings and loan firm, was closed by the U.S. government, making it one of the largest U.S. bank failures in history.

Its banking assets were sold to Wall Street bank JPMorgan (JPM.N: Cotización) for $1.9 billion, wiping out about $1.35 billion that TPG and its institutional investors, known as "Limited Partners" had invested.

"At that time, SAFE was certainly shocked by the news that the U.S. government decided to take over WaMu and there was almost nothing that SAFE could do to save its investment," said one of the sources.   Continuación...