Washington Mutual Gets $7B Bailout From Investor Group
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Washington Mutual Inc., the largest American savings and loan, got $7 billion from a group of investors led by David Bonderman’s TPG Inc. after losses on subprime loans ate up capital and erased 74% of its market value.
Washington Mutual sold 176 million shares at $8.75 a piece, 33% below yesterday’s closing price on the New York Stock Exchange, and $5.5 billion in convertible preferred shares, the company said in a statement yesterday. TPG will buy $2 billion of the shares. The lender also slashed its dividend and announced 3,000 job cuts.
The chief executive officer, Kerry Killinger, struggling to reassure investors the lender has enough capital to stay afloat, said the dividend cut will preserve $490 million annually. Seattle-based Washington Mutual, which said today it lost $1.1 billion in the first quarter, will stop making loans through mortgage brokers and close 186 home-lending offices.
“The question is whether this is enough to stop the bleeding,” a portfolio manager at Leuthold Weeden Capital Management in Minneapolis, Matthew Paschke, said.
