Washington Mutual was an early leader to offer subprime adjustable rate mortgages to the general public and by the end of last year the losses started to mount. In the fourth quarter of 2007 WAMU posted a loss of $1.87 billion wiping out all earnings for the 2007 year. The beginning of 2008 is not looking good for WAMU’s mortgage lending business with an estimated $1.1 billion loss in the first quarter alone.
On April 8th WAMU announced that it would receive a cash infusion of $7 billion from Texas Pacific Group, a principal investment firm specializing in buyouts and investments in distressed companies. TPG was founded in 1992 by Mr. David Bonderman, Mr. Jim Coulter, and Mr. William Price and is based in Fort Worth, Texas. The firm has additional offices in the U.S., U.K., Hong Kong, Luxembourg, Australia, Russia, India, China, Singapore, and Japan.
Washington Mutual said that it will sell 176 million shares of its stock at $8.75 dollars per share and other special shares to help raise much needed capital. To further boost capital WAMU said that it would cut its quarterly dividend to 1 cent per share compared to prior dividends of 15 cents per share.
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