http://online.wsj.com/article/SB10001424052702304319804576388173518462258.html?ru=yahoo&mod=yahoo_hs
Washington Mutual Inc.'s shareholder committee has resumed its investigation of alleged insider trading by four hedge funds involved in direct restructuring talks with the bank's bankruptcy estate—Appaloosa Management, Aurelius Capital Management, Centerbridge Partners and Owl Creek Management.
The shareholder committee had agreed to postpone the investigation in early June after reaching a tentative restructuring deal with the funds, but those talks have broken down, according to a person familiar with the matter. The committee filed notice Wednesday that it will depose representatives from three of the funds—Appaloosa, Centerbridge and Owl Creek—on June 23 and 24, according to court documents.
Attorneys for Washington Mutual declined to comment. Centerbridge and Aurelius declined to comment; Owl Creek and Appaloosa didn't return requests for comment.
Known as the settlement noteholders, the funds have been involved in restructuring talks with the Washington Mutual estate since early 2009 because they own majority stakes in bank's subordinated bonds and trust preferred securities.
Delaware Bankruptcy Court Judge Mary Walrath rejected in December a restructuring plan supported by the estate and the funds and subsequently ordered an investigation into allegations of insider trading by the funds.
Attorneys for the shareholder committee deposed Aurelius in early May but postponed questioning the other funds after they proposed a new workout. That deal would have given Washington Mutual shareholders new stock in a successor entity to the bank's holding company that would own the tax benefits from the net operating losses the bank accumulated in 2007 and 2008.
In order to take advantage of those tax benefits, the new vehicle would need to acquire other companies that could use the losses to offset gains and lower their tax bills, said people involved in the talks. The undeposed noteholders negotiated a deal in principle with the equity committee last month by offering to fund that strategy with a $100 million loan to the successor entity, according to the people.
Washington Mutual's attorneys trumpeted the agreement in a hearing May 24, stating that it paved the way for an exit from Chapter 11 by August, just shy of the bankruptcy's three-year anniversary. But as the equity committee, led by individual investor Michael Willingham, and the funds hammered out the fine points, fault lines began to appear, said the person familiar with the matter.
Representatives for the equity committee flew to New York to meet with settlement holders this week and ultimately rejected the most recent version of the restructuring plan, said the person familiar. Unless negotiations resume, Washington Mutual will seek confirmation for a plan without support from shareholders at a July 6 hearing.
Washington Mutual trust preferred securities rose 1.5% to $16 per unit Wednesday while its common stock fell 7% to 12 cents per share.
Write to Matt Wirz at [email protected]
