Washington Mutual gets 7-billion-dollar infusion

Other News Materials 8 April 2008 21:18 (UTC +04:00)

( dpa ) - The ailing Washington Mutual Inc, the country's largest savings and loan firm, Tuesday revealed an infusion of 7 billion dollars from a group of private investors as it moved to cut 3,000 jobs, slash its dividend to stockholders and restrict its mortgage business.

The group of investors led by David Bonderman's TPG Inc bought up 176 million shares at 8.75 dollars a share, a 33 per cent discount from Monday's closing price on Wall Street.

Washington Mutual's shares have lost 74 per cent of their share value in the wake of the US mortgage and credit crisis that has taken a heavy toll on the US and world financial system. In the first quarter, it lost 1.1 billion dollars.

Chief Executive Officer Kerry Killinger said the dividend cut would save 490 million dollars a year.

The company also said it would stop making loans through mortgage brokers - who are blamed for much of the subprime lending practices to risky borrowers - and close 186 home-lending offices, Bloomberg financial news agency reported.

One analyst, Vincent Farrell of Scotsman Capital Management LLC, told Bloomberg that Washington Mutual shareholders were taking a huge loss, but that it was a positive sign that "capital can be raised during these stressful times."

The world's biggest financial companies have written down assets or set aside money to cover more than 200 billion dollars in bad loans.

The International MOnetary Fund said Tuesday it expected the figure for the US alone to rise to 565 billion dollars before all is said and done, and to reach a staggering 945 billion dollars for the global finance system.