NEWS JUST POSTED ON ETRADE
By Peg Brickley
Of DOW JONES DAILY BANKRUPTCY REVIEW
WILMINGTON, Del. (Dow Jones)--Washington Mutual Inc. (WAMUQ) pushed off a
scheduled Thursday showdown over its Chapter 11 exit plan for "good faith
negotiations" with shareholders who have been campaigning for answers about the
largest banking collapse in U.S. history, that of Washington Mutual Bank, or
WaMu.
Brian Rosen, attorney for WaMu's former parent, told a bankruptcy judge that
the company and shareholders had agreed to stand down from continued
hostilities in order to hold discussions about reshaping a Chapter 11 plan that
leaves shareholders with nothing.
"Based upon the good faith negotiations," Washington Mutual postponed
consideration of its Chapter 11 plan, and shareholders agreed to hold off on
pushing for an investigation into WaMu's collapse, said Rosen, who is with Weil
Gotshal & Manges.
"There's certainly no guarantee about the end result, but we are engaged in
discussions," said shareholder attorney Justin Nelson, who is with Susman
Godfrey.
"Serious and substantial" issues remain to be resolved, Nelson said at a
hearing in the U.S. Bankruptcy Court in Wilmington, Del.
The proposed bankruptcy court investigation is also aimed at Washington
Mutual's decision to settle with regulators and with J.P. Morgan Chase & Co.
(JPM), WaMu's new owner, in an amount that means most creditors get paid, but
shareholders lose all.
Judge Mary Walrath had indicated she was ready to order the probe, after
shareholders complained Washington Mutual was being stingy with documents that
detailed what went wrong at WaMu, and how the decision to sell it to Chase came
about.
Under threat of an investigation, Washington Mutual went into meetings with
lawyers representing the official committee of equity shareholders in the case.
Allegations about the loss of WaMu range from mismanagement, to collusion, to
fraud in a series of actions filed and threatened against the Federal Deposit
Insurance Corp. and J.P. Morgan. The FDIC brokered the $1.9 billion sale.
The proposed settlement gives Washington Mutual $4 billion in cash that was
in its bank accounts at WaMu in September 2008, when the thrift was seized by
regulators who said it was on the brink of disaster.
Stuffed with risky mortgages, WaMu was in trouble, but wasn't a candidate for
seizure, according to shareholders and bondholders whose debt tracks to the
thrift, rather than to the parent company.
WaMu's former parent, Washington Mutual, filed for Chapter 11 protection
immediately after the seizure, with debts estimated at $8 billion. That doesn't
include the shareholders or certain other classes of securities caught in the
complex capital structure of the Seattle bank-holding company.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and
those under bankruptcy protection.)
-By Peg Brickley, Dow Jones Daily Bankruptcy Review; 302-521-2266;
[email protected]