www.bloomberg.com/news/2012-02-14/...rred-shareholders-1-.html
WaMu Fails to Win Votes Needed From Preferred Shareholders
Preferred shareholders of Washington Mutual Inc. (WM), the former owner of the biggest U.S. bank to fail, voted against the company’s $7 billion reorganization proposal, disrupting WaMu’s effort to win court approval of the plan.
Preferred shareholders who hold about 38 percent, or $2.48 billion worth, of the equity voted against the plan, according to court records filed yesterday in Wilmington, Delaware.
Under the U.S. bankruptcy code, that would typically be enough to block common shareholders from collecting any money, even though they settled a potential lawsuit against higher- ranking creditors and voted in favor of the plan with the expectation of getting paid.
“It looks like the settlement for the common shares is out the window,” Kevin Starke, senior analyst with CRT Capital Group Inc., said in a telephone interview.
On Feb. 16, WaMu is scheduled to try for the third time to win court approval for its reorganization plan, which would pay $7 billion to creditors. That plan, which includes a settlement endorsed by a committee of preferred and common shareholders, would give shareholders new stock in the only part of the company to survive.
Legal Strategy
In court papers filed yesterday, WaMu laid out a legal strategy that tries to ensure common shareholders collect something. WaMu argued that at least part of the ‘no’ vote should be discounted because it was cast by creditors who hold other WaMu securities.
Those creditors, who hold so-called Trust Preferred Securities, voted with “a bad-faith ulterior motive,” WaMu said in court papers.
Under bankruptcy rules it may be difficult for WaMu to persuade U.S. Bankruptcy Court Judge Mary Walrath to discount the no votes, Starke said in an interview today.