Layoffs, closures will cost WaMu more than $140 million

Washington Mutual on Friday said that shutting down the rest of its free-standing home-loan offices and eliminating 2,600 to 3,000 workers will cost it $140 million to $180 million, before taxes.

In a regulatory filing, the Seattle-based thrift also filled in more details on the massive capital raise unveiled earlier this week — including the fact that if the new investors fully convert their preferred stock and warrants into WaMu common stock, they will have acquired just over 50 percent of the company for less than $7.8 billion.

WaMu is raising capital and cutting jobs as it attempts to survive the collapse of the U.S. housing boom and the subsequent evaporation of much of the market for mortgage-backed securities.

According to documents filed with the Securities and Exchange Commission, Seattle-based WaMu raised $7.2 billion — $200 million more than initially reported. It sold $1.54 billion in common stock and $5.66 billion in preferred stock to an investor group led by private-equity firm TPG, formerly Texas Pacific Group.

TPG put up $2 billion of the total amount. The other investors — identified only as Olympic Investment Partners, a newly formed Delaware limited partnership, but described as including several of WaMu's largest institutional shareholders — kicked in the remaining $5.2 billion.

The investors' preferred stock automatically converts into 646.5 million shares of common stock, assuming WaMu shareholders agree. The conversion likely will occur on June 30, since otherwise WaMu will have to pay the investors a $792 million dividend.

TPG and Olympic also received warrants for 57.1 million and 11.2 million common shares, respectively, for accepting transfer restrictions on their newly acquired shares. TPG agreed not to transfer any of its shares for 18 months; Olympic agreed to lock up 100 million of its shares for nine months.

The investors can exercise their warrants for $8.75 a share, the same price at which they bought their common stock. That would potentially mean another $597.6 million for WaMu.

Assuming all the preferred shares convert and all the warrants are exercised, TPG would end up with about a 16.1 percent stake in WaMu. Olympic would have about 34.1 percent, plus whatever its unidentified members previously owned.

Also Friday, the prospect of wider mortgage-related losses this year for WaMu led analysts for Goldman Sachs to recommend that investors sell the stock short, positioning them to profit from a decline in the share price.

WaMu shares closed at $10.95 Friday, down 47 cents. The stock was up 7.7 percent for the week.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com