WaMu Junior Noteholder Claims Can't Move Up in Payment Order, Judge Rules
Bondholders of Washington Mutual Bank, the biggest U.S. bank to fail, can’t move ahead of other unsecured creditors in the bankruptcy of the company’s former parent, Washington Mutual Inc., a judge ruled.
The ruling means some of the bondholders who purchased $13 billion in notes from WaMu’s bank will be the next-to-last creditors paid under WaMu’s proposed bankruptcy-exit plan.
“They are the major losers in this bankruptcy,” bondholder attorney Geoffrey C. Jarvis said in an interview after the ruling. “This was not a totally unexpected result.”
U.S. Bankruptcy Judge Mary F. Walrath in Wilmington, Delaware ruled last year that some of the bank bondholders had the right to file a claim in WaMu’s bankruptcy. Under today’s ruling those claims can only be paid should all other unsecured claims be paid in full. The bondholders rank ahead of shareholders.
Walrath has not yet ruled on WaMu’s bankruptcy exit plan, which is designed to distribute $7 billion to creditors of the former bank holding company. The plan assumes that the $7 billion will not be enough to pay all noteholders in full.
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 for $1.9 billion. Before it failed, Washington Mutual Bank had 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 U.S. Bankruptcy Court in Wilmington, Delaware, at schurch@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
Rate this Page