WaMu postpones disclosure statement hearing again

by Zagros on June 17, 2020

Thu Jun 17, 2020 9:48am EDT

* Company to seeks to delay disclosure statement hearing

* Company says talks with shareholders continue

By Tom Hals

WILMINGTON, Del., June 17 (Reuters) - Washington Mutual Inc (WAMUQ.PK) will ask a bankruptcy judge on Thursday to postpone a key hearing as it tries to resolve disputes over documents it should provide to shareholders, according to court papers.

The company, which filed for bankruptcy after its lending business was seized in the biggest bank failure in U.S. history, needs to resolve disputes with shareholders before it can send a plan of reorganization to creditors for a vote.

Late Wednesday the company filed an agenda with the court that indicated it will ask for hearing on its disclosure statement, which describes the plan to voting creditors, be postponed until July 8 to allow more time for talks with shareholders.

Washington Mutual plans to distribute about $7 billion to creditors and emerge from Chapter 11 as a much smaller company with valuable tax breaks.

The reorganization plan wipes out the company’s shares and offers little recovery for holders of bonds issued by its bank.

Shareholders 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 in 2008.

Immediately after the bank was seized, it was sold by the Federal Deposit Insurance Corp to JPMorgan Chase & Co (JPM.N) for $1.9 billion.

Shareholders want the information and documents the company uncovered in its investigations of the bank failure, which shareholders say might show that regulators jumped the gun in seizing the bank and that it was sold too cheaply.

The company has refused to provide all of the documents the shareholders want, arguing the information is protected by attorney-client privilege.

Washington Mutual has spent most of its time in Chapter 11 investigating and fighting lawsuits against JPMorgan and the FDIC.

The company recently reached an agreement with JPMorgan and the FDIC to divide various disputed assets and grant releases from liability to end its protracted court fights.

Shareholders argue that agreement shortchanges them and the company never properly investigated potential liabilities.

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)

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