WILMINGTON, Del., Feb 16 (Reuters) - Washington Mutual Inc reached an agreement on Thursday that gave it the needed
approval of creditors to end its bankruptcy three years after
its namesake bank was seized by regulators.
A group of preferred shareholders agreed to change their
votes and they now support the company's reorganization plan,
according to Brian Rosen of Weil, Gotshal & Manges LLP, which
represents the company.
Rosen was speaking at a bankruptcy court hearing to approve
the company's reorganization plan, which will pay about $7
billion to its creditors.
Thursday's hearing was delayed for several hours as
attorneys negotiated outside the courtroom to win over a small
group of preferred shareholders.
Earlier in the week, court papers showed that about 62
percent of preferred shareholders voted to approve the company's
reorganization plan. Without the required two-thirds majority,
no lower priority claim could be paid until the preferred
shareholders were paid in full.
That meant common shareholders might receive nothing,
despite agreeing in December to settle their hard-fought
objections in return for a stake in the reorganized company.
To win over enough preferred shareholders, Washington Mutual
increased their stake in the reorganized company that will
emerge from bankruptcy to 75 percent from 70 percent, according
to court documents. The remaining part of the reorganized
company, which operates a mortgage reinsurance business, will be
owned by common shareholders.
The preferred shareholders who changed their votes will also
receive a general unsecured claim of $619,000 and they will be
allowed to receive up to $18 million from settlement funds
previously offered by JPMorgan Chase & Co.
The preferred shareholders may also seek reimbursement for
their expenses up to $15 million, Rosen told the court.
Washington Mutual's lending business was seized by
regulators at the height of the 2008 financial panic in the
biggest bank failure in U.S. history.
The bank was immediately sold by the Federal Deposit
Insurance Corp to JPMorgan Chase & Co for $1.88 billion.
Washington Mutual filed for bankruptcy the next day, and legal
battles quickly followed over who owned which assets.
Thursday's confirmation hearing is the company's third to
end its bankruptcy.
Judge Mary Walrath rejected the company's two previous
plans, in part because of her concerns that a group of hedge
funds had used their role negotiating the bankruptcy plan to use
nonpublic information in trading Washington Mutual securities.
Walrath adjourned the hearing until Friday morning.
The company's common stock ended down 2.6 percent at 4.18
cents in pink sheet trading.
The case is In re Washington Mutual, U.S. Bankruptcy Court,
District of Delaware, No. 08-12229.
For Washington Mutual: Andrew Irgens, Chun Jang, Cory
Kandestin, Drew Sloan, Jason Madron, Julie Finocchiaro, Lee
Kaufman, Mark Collins and Travis McRoberts of Richards, Layton &
Finger; David Hird, Diana Eng, Lisa Cloutier, Patricia Astorga,
Rachel Swartz and Richard Slack of Weil, Gotshal & Manges; David
Permut of Goodwin Procter; David Stern, Lee Bogdanoff, Matthew
Heyn and Whitman Holt of Klee, Tuchin, Bogdanoff & Stern; Neil
Lapinski, Rafael Zahralddin-Aravena, Shelley Kinsella and
Theodore Kittila of Elliott Greenleaf.
(Reporting by Tom Hals)
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