WaMu debt protection costs jump, shares drop

NEW YORK, July 24 (Reuters) - The cost to insure the debt of Washington Mutual Inc (WM.N) jumped on Thursday and began trading at terms that indicate higher concerns about the bank's credit quality, and its stock fell about 18 percent.

Credit research firm Gimme Credit said in a report on Thursday that some unsecured creditors are reducing their exposure to the bank. "We would be remiss if we did not observe that many creditors have quietly been pulling funds from the bank," Gimme Credit analyst Kathleen Shanley said in a report.

Washington Mutual was not immediately available for comment.

Credit default swaps on Washington Mutual's debt rose to an upfront cost of 12.5 percent to insure $10 million in debt for five years, in addition to annual premiums of 500 basis points, according to Markit Intraday. The swaps typically start trading on an upfront basis when spreads widen over 1000 basis points.

The swaps closed at 832.5 basis points on Wednesday, according to Markit Intraday.

Washington Mutual shares traded down 17.9 percent to $3.82 in afternoon trade.

(Reporting by Karen Brettell; Editing by Leslie Adler)

((karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net )) Keywords: WASHINTONMUTUAL/

(C) Reuters 2008. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nN24303774