UPDATE 1-WaMu postpones key hearing for shareholder talks

by Zagros on June 17, 2020

2020-06-17 17:38:32 GMT (Reuters)

Company delays disclosure statement hearing for talks

* Company says to file amended plan by June 30

(Adds details from hearing and rewrites throughout)

By Tom Hals

WILMINGTON, Del., June 17 (Reuters) - Bankrupt Washington Mutual Inc postponed a key hearing on Thursday, which the company’s attorney said would allow more time to discuss with shareholders changes to its planned reorganization.

The company, whose bankruptcy stems from the biggest bank failure in U.S. history, said the hearing on the company’s disclosure statement and shareholders’ request for an independent examiner would be heard on July 8.

The parties hope to “see if a resolution can be reached to modify the plan and the disclosure statement,” said Brian Rosen, an attorney with Weil, Gotshal & Manges, which represents the company.

A disclosure statement describes the reorganization and it must be approved before the company can ask creditors to vote on the plan.

Washington Mutual filed for bankruptcy the day after its bank was seized by lenders at the height of the 2008 financial panic. The bank was immediately sold by the Federal Deposit Insurance Corp to JPMorgan Chase & Co for $1.9 billion.

The holding company has spent most of its stay in Chapter 11 fighting lawsuits against JPMorgan and the FDIC, which it had blamed for the bank’s failure.

Earlier this year, Washington Mutual agreed to settle those lawsuits and divide disputed assets with the FDIC and JPMorgan.

That settlement agreement forms the basis of Washington Mutual’s reorganization, which will distribute about $7 billion to creditors and emerge from Chapter 11 as a much smaller company with valuable tax breaks.

Shareholders want access to documents that will show how the company put a value on the settlement, which will leave nothing for them.

Shareholders have said they believe the company’s assets could be worth more than twice what Washington Mutual estimates, in part because they believe it has valuable legal claims against the parties responsible for the bank seizure.

On Thursday, the company’s attorney said it had met twice with creditors about providing documents, and had a set up a data room to share all necessary documents for evaluating the settlement.

Rosen said talks would continue with shareholders and the company would file an updated disclosure statement and plan of reorganization statement with the court by June 30. The judge, Mary Walrath, indicated any changes made after that date could delay the disclosure statement hearing again.

The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware (Wilmington), No. 08-12229.

(Reporting by Tom Hals; Editing by Maureen Bavdek, Phil Berlowitz)
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