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Washington Mutual Bondholders Defy JPMorgan On Disclosure
By PEG BRICKLEY
Of DOW JONES NEWSWIRES
In a dispute that turns the spotlight on the dynamics of investing in
bankrupt companies, 30 hedge funds and banks are fighting a bid to
force them to divulge details of their trading in the debt of
Washington Mutual Inc., the former parent of Washington Mutual Bank.
The battle has erupted in the parent company's bankruptcy case, where
bondholders have been giving JPMorgan Chase & Co. (JPM) a rough time
over its $1.9 billion purchase of the ailing thrift.
JPMorgan insists it gets to keep some $4 billion in cash, more
billions in tax returns and other extras, along with WaMu's banking
business.
Parent company bondholders say the cash, the refunds and the extras
belong to them. They joined forces early on to fight JPMorgan in the
parent company's bankruptcy proceedings, hoping to improve their
chances of recovery.
The bondholders have spoken out in court as a group, filed papers and
got a seat at the bankruptcy bargaining table, a crucial advantage to
protecting their chances of collecting their debts.
In March, WaMu parent company bondholders participated in settlement
talks with regulators, the parent company, JPMorgan and the official
creditors committee, court documents say.
Investors are hoping for a deal to end the complex litigation over
WaMu's collapse, so they can get paid earlier rather than later.
Settlement negotiations ended March 24, when JPMorgan filed a lawsuit
against the parent company.
Earlier this month, JPMorgan asked a bankruptcy judge to order the
parent company bondholders to say who they are, how much debt they
hold, when they bought it, and what they paid for it. JPMorgan says
it's entitled to know who it's up against, and how much they have
riding on the outcome.
The list of parent company bondholders reads like a Who's Who of Wall
Street. Affiliates of Goldman Sachs Group Inc. (GS), Deutsche Bank AG
(DB), Citigroup Inc. (C), Bank of America Corp. (BAC) populate the
roster, along with a couple dozen investment funds, court documents
reveal. In the aggregate, they own $3.26 billion worth of debt issued
by the bank holding company.
Aggregate holdings are all they want to report, according to a filing
Wednesday in the U.S. Bankruptcy Court in Wilmington, Del. Disclosing
their trading histories means tipping their hands in the debt markets,
and that's unfair, bondholders said in court papers.
Trading in the debt of WaMu's parent company has been intense almost
from the time in September 2008 when regulators seized WaMu and sold
it to JPMorgan.
Such speculation is not for the small player, with prices at 87.5
cents on the dollar and debt trading regularly in lots of $1 million
or more.
In Wednesday's filing, however, parent company bondholders who formed
a "noteholders group," say they chipped in to hire lawyers to save
money, but aren't really a committee. The rules for disclosing claims
trading data, therefore, don't apply to them, the parent company
bondholders say.
Lawyers from White & Case and Kasowitz Benson Torres & Friedman
represent one group of bondholders, and insist they heeded the rules
about naming the names of their multiple clients.
Wednesday, they accused JPMorgan of seeking tactical advantage by
preying on the "sensitivity creditors generally have with respect to
the disclosure of claims trading information."
By PEG BRICKLEY
Of DOW JONES NEWSWIRES
In a dispute that turns the spotlight on the dynamics of investing in
bankrupt companies, 30 hedge funds and banks are fighting a bid to
force them to divulge details of their trading in the debt of
Washington Mutual Inc., the former parent of Washington Mutual Bank.
The battle has erupted in the parent company's bankruptcy case, where
bondholders have been giving JPMorgan Chase & Co. (JPM) a rough time
over its $1.9 billion purchase of the ailing thrift.
JPMorgan insists it gets to keep some $4 billion in cash, more
billions in tax returns and other extras, along with WaMu's banking
business.
Parent company bondholders say the cash, the refunds and the extras
belong to them. They joined forces early on to fight JPMorgan in the
parent company's bankruptcy proceedings, hoping to improve their
chances of recovery.
The bondholders have spoken out in court as a group, filed papers and
got a seat at the bankruptcy bargaining table, a crucial advantage to
protecting their chances of collecting their debts.
In March, WaMu parent company bondholders participated in settlement
talks with regulators, the parent company, JPMorgan and the official
creditors committee, court documents say.
Investors are hoping for a deal to end the complex litigation over
WaMu's collapse, so they can get paid earlier rather than later.
Settlement negotiations ended March 24, when JPMorgan filed a lawsuit
against the parent company.
Earlier this month, JPMorgan asked a bankruptcy judge to order the
parent company bondholders to say who they are, how much debt they
hold, when they bought it, and what they paid for it. JPMorgan says
it's entitled to know who it's up against, and how much they have
riding on the outcome.
The list of parent company bondholders reads like a Who's Who of Wall
Street. Affiliates of Goldman Sachs Group Inc. (GS), Deutsche Bank AG
(DB), Citigroup Inc. (C), Bank of America Corp. (BAC) populate the
roster, along with a couple dozen investment funds, court documents
reveal. In the aggregate, they own $3.26 billion worth of debt issued
by the bank holding company.
Aggregate holdings are all they want to report, according to a filing
Wednesday in the U.S. Bankruptcy Court in Wilmington, Del. Disclosing
their trading histories means tipping their hands in the debt markets,
and that's unfair, bondholders said in court papers.
Trading in the debt of WaMu's parent company has been intense almost
from the time in September 2008 when regulators seized WaMu and sold
it to JPMorgan.
Such speculation is not for the small player, with prices at 87.5
cents on the dollar and debt trading regularly in lots of $1 million
or more.
In Wednesday's filing, however, parent company bondholders who formed
a "noteholders group," say they chipped in to hire lawyers to save
money, but aren't really a committee. The rules for disclosing claims
trading data, therefore, don't apply to them, the parent company
bondholders say.
Lawyers from White & Case and Kasowitz Benson Torres & Friedman
represent one group of bondholders, and insist they heeded the rules
about naming the names of their multiple clients.
Wednesday, they accused JPMorgan of seeking tactical advantage by
preying on the "sensitivity creditors generally have with respect to
the disclosure of claims trading information."
