Mumbai: Wachovia Corporation, the fourth-largest US bank, which reported a $393 million first-quarter loss amidst mounting problems related to mortgages and other debt, is expected to get a $7 billion capital infusion.

The unexpected loss has also prompted the bank to lower its dividend and announce plans for job cuts.

Wachovia, which entered the adjustable-rate mortgage market with the acquisition of Golden West Financial amidst the US housing boom, is the latest major lender to announce credit-related losses.

Final terms of the $7 billion capital funding deal are being worked out and the investor group would be offered shares at roughly $23-24 each - a 15 per cent discount to Wachovia's share price last week.

The deals, however, could dilute the stakes of investors who are left out.

"These actions are not without cost and I wish they were not necessary, but they are," chief executive Ken Thompson said.

Wachovia, which has been hurt by the ill-timed, $24.2 billion purchase of Golden West Financial Corp in 2006, said the nation's housing slump is only half over, and might not hit bottom until the middle of 2009.

No government investment funds are believed to be among the investors pumping capital into Wachovia, which had already lifted $3.5 billion through preferential offer two months ago.

The funds would most likely come from private equity firms and other large investors.

Wachovia was also a player in the structured finance market, and it has billions of dollars in exposure to risky assets on its books. Wachovia reported holding a total of about $20 billion in leveraged loans and securities tied to sub-prime and commercial mortgages as of end-2007.

Loan defaults are likely to surge even higher if the economy sinks into a deep recession.