WaMu gets $7 billion infusion, sees big loss
NEW YORK -- Washington Mutual Inc, the largest U.S. savings and loan, said today it received a $7 billion capital injection from private equity firm TPG Inc and other investors.
The thrift also said it expects to report a first-quarter loss of $1.1 billion, or $1.40 per share. It expects to set aside $3.5 billion in the quarter for loan losses, nearly twice as much as it previously projected, and said net charge-offs will total $1.4 billion.
Separately, the Seattle-based thrift set plans to reduce its mortgage operations by closing all its freestanding home loan offices, and to stop offering home loans through brokers.
WaMu, as the thrift is known, also said it will reduce its quarterly dividend per share to 1 cent from 15 cents, saving $490 million a year. The cut is the second in four months.
Shares of WaMu fell $1.65, or 12.6%, to $11.47 in morning trading. They had risen 29% on Monday, after news of the thrift's plans to raise $5 billion first surfaced.
In the capital-raising, WaMu sold about 176 million shares at $8.75 each, for gross proceeds of $1.54 billion. It also sold $5.5 billion of convertible preferred shares.
David Bonderman, a founding partner of TPG and a director of WaMu from 1996 to 2002, will rejoin WaMu's board. Larry Kellner, the chief executive of Continental Airlines Inc , will become a board observer, at TPG's request.
"This substantial new capital -- along with the other steps we are announcing today -- will position us for a return to profitability as these elevated credit costs subside," Chief Executive Kerry Killinger said in a statement.
WaMu joined more than a dozen commercial and investment banks to seek cash from outside investors in the last year, following more than $200 billion of write-downs and credit losses tied to the nation's housing and credit crisis.
