NEW YORK (MarketWatch) -- Shares of Washington Mutual Inc. leapt nearly 23% Monday on news the troubled thrift is in negotiations to receive a $5 billion cash infusion from private-equity firm TPG and a consortium of other investors.

The deal was first reported by The Wall Street Journal and cited unnamed sources close to the negotiations.

Shares of Seattle-based WaMu WM, -0.55% rallied midday, climbing as high as $12.44. The company's shareholders have seen their holdings lose nearly 75% of their value, and management recently was worried it would not be able to meet capital requirements.

Moreover, the cost of protecting WaMu's debt with credit-default swaps was reportedly down nearly 20% in early trading.

The funding from the TPG-led group would be structured as an offering of both common and preferred shares of WaMu, the Journal reported. In addition, TPG would receive a seat on the company's 14-director board.

Sources also said that unlike last month's 11th-hour bailout of Bear Stearns Cos. BSC, -10.00% , government regulators were not directly involved in playing matchmaker for the parties in the prospective WaMu deal, according to the Journal.

WaMu declined to comment to MarketWatch on Monday.

TPG, formerly known as Texas-Pacific Group, is one of the largest players in private equity and has holdings in companies as varied as MGM studios, telecom carrier Alltel Corp. and casino operator Harrah's.

The nation's largest savings and loan, WaMu has been steadily losing value after a year of fallout in the housing market greatly affected its earlier investments in subprime mortgages. The company posted a $1.87 billion in loan-related losses in the fourth quarter alone.

An investment on the scale of $5 billion would significantly dilute the holdings of current shareholders in WaMu, but it could be viewed as a favorable option for saving the bank from becoming a potential takeover target.

The Journal report also cited an unnamed source who said that executives from blue-chip giant J.P. Morgan Chase & Co. JPM, -0.84% had been in talks with WaMu about acquiring the bank but that those negotiations faltered last week.

The bank had been struggling in recent months to maintain its capital reserves, cutting more than 3,000 jobs and slashing its dividend by 72%, to 15 cents a share. It also sold nearly $4 billion in preferred stock in an attempt to build up a capital cushion.

Paul Miller, analyst with Friedman Billings Ramsey, warned in a research note in March that many marquee-name banks are experiencing growing ratios in terms of their non-performing assets to risk-based capital.

Miller said WaMu's ratio was currently at 21.8%, one of only a handful of institutions with a level that high. In comparison, troubled mortgage lender Countrywide Financial Corp. CFC, currently sits at 29.2%.

WaMu is holding a shareholder meeting April 15.