Battered by subprime mortgage losses, savings and loan bank Washington Mutual, Inc sold $7 billion in shares to a group of investors led by TPG Capital and will stop providing home loans through brokers while closing all its free standing home loan offices.
WaMu agreed to sell a total of 176 million common shares at $8.75 per share in addition to 55,000 contingently convertible shares at the same price.
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, said WaMu Chairman and CEO Kerry Killinger in a statement.
WaMu's capital boost follows in the tracks of other major banks including Citigroup Inc. and Merrill Lynch & Co. who earlier sought funds from investors to strengthen their balance sheets.
Shares fell $1.09, or 8.29 percent to $12.02 in late morning trading.
TPG's founding partner David Bonderman will be installed as a WaMu board member. He previously held a post on the board from 1996 to 2002.
In addition, at TPG's request, the Chairman Chief Executive of Continental Airlines, Larry Kellner will become a board observer. Kellner was formerly a chief financial officer at American Savings Bank.
In another boost to improve its capital position, the company said it would reduce its dividend to 1 cent per share from 15 cents per share, preserving up to $490 million annually.
The company also said it would focus its efforts on its retail banks and call center.