Washington Mutual Inc. (WAMUQ) and its biggest creditors agreed to settle a fight with shareholders by giving them control of the company that will emerge from bankruptcy, two people familiar with the proposal said.
The outline of the deal includes $25 million for a litigation trust that would bring lawsuits to collect more money for shareholders. In return, shareholders would drop allegations that hedge funds who own $2.54 billion of WaMu’s debt used confidential information to guide their investments.
Shareholders are among the last opponents to WaMu’s reorganization plan, which would pay more than $7 billion to creditors, who are mostly unsecured note holders.
Details of the proposed settlement have not yet been decided and the deal could still fall through, one of the people said.
WaMu, based in Seattle, filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan Chase & Co. (JPM) for $1.9 billion. Washington Mutual Bank was the biggest bank to fail in U.S. history, with more than 2,200 branches and $188 billion in deposits.
The case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net Linda Sandler in New York at lsandler@bloomberg.net.
www.bloomberg.com/news/2011-05-20/...t-bankruptcy-control.html
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