WaMu to raise $2.5 billion, resize home loans business, reduce dividend rate in wake of market turmoil

By Lisa Kerner

Charlotte, N.C., Dec. 10 - Washington Mutual, Inc. will undertake a series of actions designed to "address the unprecedented challenges in the mortgage and credit markets," according to a company news release.

To strengthen its capital and liquidity as well as to align its home loans business with the company's retail banking operations, Washington Mutual's actions will include:

• A capital offering of convertible preferred stock with total proceeds of some $2.5 billion;

• A major reduction in company-wide noninterest expense of $500 million for 2008 through resizing the home loans business; and;

• A change in the strategic focus of the home loans business in response to the changed market.

More specifically, Washington Mutual expects to discontinue all remaining lending through its subprime mortgage channel, to close 190 of 336 home loan centers and sales offices, to close nine call centers and to eliminate 2,600 home loans positions and 500 corporate and support positions.

Washington Mutual will also close WaMu Capital Corp., its institutional broker-dealer business, as well as its mortgage banker finance warehouse lending operation.

The board of directors also plans to reduce the quarterly dividend rate to $0.15 per share from its most recent quarterly dividend rate of $0.56 per share, the release stated.

Washington Mutual said it will generate some $3.7 billion of tangible equity as a result of these measures.

Washington Mutual is a Seattle consumer and small business banking company.

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