WaMu Hearing Postponed
Washington Mutual, Inc., said recently before a bankruptcy judge, they are close to reaching an agreement with the Federal Deposit Insurance Corporation, which will allow the bank to see life again, after filing Chapter 11 bankruptcy. Because WaMu, its bondholders, JP Morgan Chase & Company and the FDIC are all entitled to a share of WaMu’s assets, the case itself has been ongoing and stifled.
The four groups filed lawsuits against one another over an estimated $4 billion in disputed deposit accounts, on the heels of the FDIC’s seizing WaMu’s flagship bank and selling its assets to JP Morgan for $1.9 billion, two years ago. Originally, WaMu proposed JP Morgan turn over the disputed deposits back to them, after deducting $172 million—its share of tax refunds received. According to the proposal, JP Morgan would then get 70% of expected tax refunds as a result of WaMu’s prior operating losses, which are an estimated $3 billion—and WaMu would get 30%.
The new plan/agreement, revises the split: 80-20. In addition, WaMu was to receive roughly 40% of a second round of operating-loss tax refunds, worth an estimated $2.6 billion—with nearly 60% of it going to the FDIC. The present plan would give WaMu 68.5% and the FDIC, 31.5% of these refunds, in return for new indemnity concessions from JP Morgan.
As well, with the current plan, bank bondholders are eligible to receive 5.5% of WaMu Inc.’s share of the second round of tax refunds—with a cap of $150 million. Shareholders, however, still won’t receive anything according to the plan. Lawyers said more changes are needed to the WaMu’s proposed reorganization plan, and it will be filed once the FDIC board approves and signs off on it.
WaMu’s attorney, Brian Rosen said, “we’re going to it done,” in response to Judge Mary Walrath’s postponement to consider whether or not to approve WaMu’s disclosure statement. “We are trying to get this case out of Chapter 11 as quickly as possible,” Rosen told the judge. Later, the lawyer said, “we will not be back before the court without the executed agreement,” pushing for immediate action on the disclosure statement.
Meanwhile, lawyers for the noteholders and shareholders are saying they’re wrapping their head around WaMu’s plans to acknowledge their claims in the settlement agreement. Twice before, both parties thought they had a deal until one side concluded they were being shortchanged; and the settlement agreement between WaMu, the FDIC and JP Morgan is the focus for the reorganization plan.
An attorney for senior notes holders—issued by WaMu prior to its being seized, Philip Anker, said, “I don’t know whether we are supportive or not supportive because I don’t know what settlement is being discussed…we need to get some reasonable time to allow people to look at it.”
According to WaMu’s lawyer, it seems as long as WaMu remains in its bankruptcy, its debt’s accrual of interest will continue to dip into funds, which sould be available for recovery by creditors. “We’re trying to stave off an erosion of the creditor body,” Rosen said to Judge Walrath.Post Tags: