Washington Mutual nears deal on $5 billion

SEATTLE -- Washington Mutual Inc., the country's largest savings and loan, is close to landing a $5 billion cash infusion from private equity group TPG and other investors, a person familiar with the matter said Monday.

Wall Street cheered news WaMu may join a growing list of battered financial institutions that have secured much-needed cash since the credit crisis began last summer. Shares jumped 29.3 percent, or $2.98, to close at $13.15 Monday.

The investment would give TPG, formerly Texas Pacific Group, a mix of common and preferred stock, totaling less than 25 percent of WaMu's outstanding shares, according to the person, who asked not to be named because the deal has not been announced. TPG would also get a seat on WaMu's board.

Other investors include existing WaMu institutional shareholders and other private equity groups, the person said.

Shares of the Seattle-based thrift have come under heavy fire as problems in the housing and credit markets have deepened. WaMu's stock shed nearly 70 percent in 2007, and the sinking value of WaMu's mortgage portfolio and soaring loan-loss provisions -- the amount it socks away to cover bad loans -- led to a $1.87 billion fourth-quarter loss.

If the deal goes through, WaMu will be one of the first retail banks to accept billions in outside funding, with hopes of distancing itself from the subprime crisis. So far, it has been mostly investment banks holding huge positions in bad mortgages that are roaming hat in hand.

The Wall Street Journal reported the deal in Monday editions.

Executives have said fallout from the mortgage crisis would continue to slam the company's finances through 2008 and said up to $8 billion more will be needed this year to cover future loan losses.

Late last year, the thrift dismantled its subprime mortgage operation, closed more than half of its home loan centers and sales offices, shut down call centers and eliminated more than 3,000 jobs. It also shuttered WaMu Capital Corp. and stopped selling mortgage-backed securities.