WaMu sells bonds to boost capital

Washington Mutual Inc., the biggest U.S. savings and loan, sold $3 billion of perpetual convertible preferred bonds Tuesday to shore up its capital after mortgage-market losses increased.

But the move didn’t cheer investors, who drove the company’s stock down $2.46, or 12.4%, to $17.42.

The Seattle company said Monday that it planned to raise $2.5 billion by selling convertible stock after writing down the value of its home lending unit by $1.6 billion and slashing its dividend. Washington Mutual agreed to pay 7.75% in interest, according to data compiled by Bloomberg News.

Washington Mutual sought the extra capital after forecasting a loss for the quarter and saying provisions for loan losses would be $1.5 billion to $1.6 billion, more than the $1.3 billion previously predicted.

The bank’s market capitalization has dropped 65% this year amid declining U.S. housing prices and record mortgage delinquencies.