WaMu Files New Bankruptcy Plan
Washington Mutual Inc. on Tuesday filed a revised bankruptcy plan it hopes will meet with the approval of a Delaware judge who last month signed off on legal settlement underlying the bank holding company's reorganization plan but refused to confirm the plan until certain changes were made.
After the company filed the amended plan Tuesday, Judge Mary Walrath scheduled a March 21 hearing on the disclosure statement outlining and explaining the plan to be voted on by WaMu's creditors.
Like the earlier proposal, the new plan is based on a legal settlement involving WaMu, the Federal Deposit Insurance Corporation and JPMorgan Chase Bank. The settlement resolved lawsuits that were filed after the FDIC seized the company's flagship bank in 2008 and sold it to JPMorgan Chase for $1.9 billion.
The judge ruled last month that the settlement was fair and reasonable, but she denied confirmation of the reorganization plan.
Walrath ruled, among other things, that the protections from future legal liabilities the plan granted to the company's directors, officers and professionals, as well as members of its creditors committee and certain third parties, were either unwarranted or too broad.
After a hearing Tuesday, Walrath denied a motion by Washington Mutual stockholders seeking her approval to file a challenge to last month's ruling directly to a federal appeals court in Philadelphia, bypassing a U.S. District Court in Wilmington, Del.
In its motion, Washington Mutual's official committee of equity security holders questioned how the proposed settlement could be deemed fair when the company presented no evidence of any legal analysis of the merits of the claims being settled. They argued that Walrath substituted her own legal analysis about the claims instead of relying on the evidentiary record.
Washington Mutual said its revised plan is supported by the FDIC, JPMorgan Chase, certain noteholders and its official committee of unsecured creditors.
Under the proposed legal settlement, their competing lawsuits would be dismissed and some $10 billion in disputed assets would be apportioned among WMI, JPMorgan and the FDIC.
JPMorgan would turn over some $4 billion in disputed deposit accounts to WMI for distribution to holders of allowed claims against the bankruptcy estate. JPMorgan in return would get 80 percent of expected tax refunds resulting from Washington Mutual's prior operating losses, which are valued at between $2.7 billion and $3 billion. Washington Mutual would get 20 percent.
Washington Mutual also would get about 70 percent of a second round of operating-loss tax refunds valued at about $2.8 billion, with roughly 30 percent going to the FDIC. WaMu would give $335 million of its share to holders of senior Washington Mutual Bank notes, who are owed billions of dollars, in return for their support of the reorganization plan.