Holders of trust-preferred securities filed an appeal from one of the rulings by the bankruptcy court on Jan. 7 refusing to confirm the reorganization of Washington Mutual Inc.
The security holders are appealing from a 20-page opinion where U.S. Bankruptcy Judge Mary F. Walrath ruled that they no longer have an interest in the securities because they were automatically converted into preferred stock of the holding company when the bank subsidiary was taken over by regulators.
The security holders may attempt to expedite the appeal so it doesn’t become moot when WaMu revises and confirms an amended plan.
For details on the Walrath’s Jan. 7 rulings, including the defects she found in WaMu’s plan, click here for the Jan. 10 Bloomberg bankruptcy report.
Assuming WaMu can remedy defects, the plan calls for distributing $7.5 billion based on a global settlement including the Federal Deposit Insurance Corp. and JPMorgan Chase & Co.
It is clear from Walrath’s opinion some creditors must be given the right to opt in or opt out of releases in favor of third parties. Until WaMu makes followup court filings, it is unclear whether any creditor classes will be allowed to vote again or when a revised plan may be ready for court approval.
Click here to read the May 18 Bloomberg bankruptcy report for a summary of WaMu’s original plan. To read about the settlement before it was modified, click here for the May 24 Bloomberg bankruptcy report. For a summary of changes WaMu made to its plan in October, click here for the Oct. 7 Bloomberg bankruptcy report.
The WaMu holding company filed under Chapter 11 in September 2008, one day after the bank subsidiary was taken over. The bank, once the sixth-largest depository and credit- card issuer in the U.S., was the largest bank failure in the country’s history. The holding company filed formal lists of assets and debt showing property with a total value of $4.49 billion against liabilities of $7.83 billion.
The holding company Chapter 11 case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
http://www.bloomberg.com/news/2011-01-18/...ankruptcy.html?cmpid=yhoo
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