WaMu launches $2.5 billion convertible perpetual preferreds for restructuring; talked at 8%-8.5%, up 18%-23%

By Evan Weinberger

New York, Dec. 10 - Washington Mutual, Inc. launched $2.5 billion in convertible perpetual preferred stock talked at a dividend of 8% to 8.5% and a conversion premium of 18% to 23% on Monday after the market close.

The deal is expected to price Tuesday after the market close.

The fund raising is part of a major restructuring in response to the bank's losses on subprime mortgages.

Credit Suisse, Goldman Sachs, Lehman Brothers and Morgan Stanley are bookrunners on the registered transaction.

There is a $375 million over-allotment option.

The preferreds are talked to have a provisional call after five years subject to a 130% hurdle.

At the same time, Washington Mutual announced a series of cost cutting measures meant to raise capital.

Washington Mutual said it will discontinue issuing subprime mortgages and close 190 of 336 home loan centers and sales offices as well as nine home loan processing and call centers.

WaMu also announced that it was eliminating around 22% of its home loan staff, or approximately 2,600 jobs. Around 550 corporate and support staff jobs will also be cut.

Washington Mutual Capital Corp., WaMu's institutional broker-dealer business, and the company's mortgage banker finance warehouse lending operation will be closed.

Washington Mutual also announced that it will incur a $1.6 billion fourth quarter after-tax charge for the write-down of all the goodwill associated with its home loan business. The company expects that the charge will result in a fourth quarter loss, but not affect its tangible or regulatory capital or liquidity.

Finally, Washington Mutual announced that it was decreasing its quarterly dividend by 15 cents to 56 cents per share for the fourth quarter.

Washington Mutual is a Seattle-based retail bank and lending institution.

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