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WaMu Settles Shareholder Bankruptcy Fight and Will Distribute $7 Billion
Washington Mutual Inc. (WAMUQ), the former owner of the biggest bank to fail, settled a dispute among its shareholders and noteholders that should end its bankruptcy and allow it to distribute more than $7 billion to creditors, a company lawyer said.
The agreement, brokered by a court-appointed mediator, calls for noteholders to contribute $75 million to the only unit of WaMu that will exit bankruptcy as well as loan the entity $125 million, Brian Rosen, the company’s lead bankruptcy attorney, said in an interview.
The settlement follows more than a year of battles among shareholders, four hedge funds that hold billions of dollars in WaMu notes, and the company. Twice WaMu failed to win approval from a bankruptcy judge for previous versions of its reorganization plan, partly because of opposition from shareholders.
Rosen said the parties agreed to a settlement because they saw WaMu’s assets as a “melting ice cube” that was losing value as the case dragged on.
“They wanted to receive their distributions from the new plan as quickly as possible,” Rosen said. The reorganized company would be owned by preferred and common shareholders, Rosen said.
Court Approval
U.S. Bankruptcy Judge Mary Walrath in Wilmington, Delaware, must approve the settlement. Details of the agreement were filed as part of a new version of the company’s reorganization plan, which Walrath must also approve before creditors can be paid.
WaMu, based in Seattle, filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan for $1.9 billion. Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits.
The parties in the mediation included four hedge funds that helped negotiate the two plans that had been rejected and shareholders who opposed them. The shareholders had accused the hedge funds of using nonpublic information that they gained while helping to negotiate the plan to trade WaMu securities.
U.S. Bankruptcy Judge Raymond T. Lyons led the mediation sessions among the creditors and shareholders.
The hedge funds deny the insider-trading allegations. Walrath had given shareholders permission to sue the funds, while delaying their right to file lawsuits until all the parties had first tried to resolve their differences through mediation.
The case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net
mobile.bloomberg.com/news/2011-12-13/...ruptcy-exit?category=/
Washington Mutual Inc. (WAMUQ), the former owner of the biggest bank to fail, settled a dispute among its shareholders and noteholders that should end its bankruptcy and allow it to distribute more than $7 billion to creditors, a company lawyer said.
The agreement, brokered by a court-appointed mediator, calls for noteholders to contribute $75 million to the only unit of WaMu that will exit bankruptcy as well as loan the entity $125 million, Brian Rosen, the company’s lead bankruptcy attorney, said in an interview.
The settlement follows more than a year of battles among shareholders, four hedge funds that hold billions of dollars in WaMu notes, and the company. Twice WaMu failed to win approval from a bankruptcy judge for previous versions of its reorganization plan, partly because of opposition from shareholders.
Rosen said the parties agreed to a settlement because they saw WaMu’s assets as a “melting ice cube” that was losing value as the case dragged on.
“They wanted to receive their distributions from the new plan as quickly as possible,” Rosen said. The reorganized company would be owned by preferred and common shareholders, Rosen said.
Court Approval
U.S. Bankruptcy Judge Mary Walrath in Wilmington, Delaware, must approve the settlement. Details of the agreement were filed as part of a new version of the company’s reorganization plan, which Walrath must also approve before creditors can be paid.
WaMu, based in Seattle, filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan for $1.9 billion. Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits.
The parties in the mediation included four hedge funds that helped negotiate the two plans that had been rejected and shareholders who opposed them. The shareholders had accused the hedge funds of using nonpublic information that they gained while helping to negotiate the plan to trade WaMu securities.
U.S. Bankruptcy Judge Raymond T. Lyons led the mediation sessions among the creditors and shareholders.
The hedge funds deny the insider-trading allegations. Walrath had given shareholders permission to sue the funds, while delaying their right to file lawsuits until all the parties had first tried to resolve their differences through mediation.
The case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net
mobile.bloomberg.com/news/2011-12-13/...ruptcy-exit?category=/
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