Washington Mutual Inc. (WAMUQ) pushed off a scheduled final confrontation
with shareholders over its $7 billion Chapter 11 exit plan by two weeks
Thursday, citing "ongoing discussions."
In a filing Thursday with the U.S. Bankruptcy Court in Wilmington, Del.,
WaMu's former parent set a new confirmation hearing date of June 29, "in light
of ongoing discussions with respect to the modified plan."
A spokesman for the company was not immediately available Friday to shed
light on the ongoing Chapter 11 plan talks.
However, shareholders are the major opponents of the plan proposed by
Washington Mutual, the former parent of the thrift that was the subject of the
largest banking collapse in U.S. history, Washington Mutual Bank, or WaMu.
Early this year, shareholders lost a bid to derail Washington Mutual's
Chapter 11 plan on the grounds it put too cheap a price on the value of
potential legal claims stemming from the loss of WaMu. They have since seized
on suspicions major debt investors engaged in insider trading during the case
to preserve hope of blocking a plan that gives shareholders nothing.
Thursday's notice said the company also extended the deadline for the
official shareholder committees to spell out its objections to the plan to June
10.
Washington Mutual's Chapter 11 plan was rejected earlier this year and has
since been revised. It still has foes other than shareholders, including
holders of trust preferred securities, and plaintiffs in securities litigation.
Those opponents have already weighed in formally against the revised Chapter
11 plan, which was slated for hearing June 6. Only shareholders have yet to be
heard from.
Lawyers for the official committee have been probing three hedge funds that
own big stakes in Washington Mutual's debt, looking for evidence they bought
and sold based on information gained at the Chapter 11 plan bargaining table.
Judge Mary Walrath noted the suspicions when rejecting the original
Washington Mutual Chapter 11 plan. Though based on hearsay evidence, the judge
said, the contentions the big bankruptcy case was tainted were of concern.
Appaloosa Management L.P., Aurelius Capital Management LP and Owl Creek Asset
Management all deny wrongdoing. All have been subjected to shareholder
questioning in recent weeks, court documents say.
If they prove out, the claims of insider trading could sway hundreds of
millions of dollars in Washington Mutual's case, which promises creditors
payment in full at the contract rate of interest and ranks some of the hedge
fund holdings as debt, rather than equity.
Shareholder attorneys have attacked the plan on both fronts, contending the
lower federal judgment rate of interest is all that's required, and that one
class of hedge fund "debt" is in fact equity, that should share the fate of
other equity in the company.
Walrath indicated proof of insider trading could sway her rulings on those
key points.
Washington Mutual's Chapter 11 plan embodies a deal with WaMu's new owner,
J.P. Morgan Chase & Co. (JPM), and with the Federal Deposit Insurance Corp.,
which brokered the sale of WaMu to J.P. Morgan after it was seized in September
2008.
