Washington Mutual Inc., the former parent of the biggest U.S. bank to fail, won court approval to send its plan to liquidate most of its remaining assets out to creditors for a vote.
U.S. Bankruptcy Judge Mary F. Walrath said she would sign an order approving the so-called disclosure statement describing the liquidation plan after Washington Mutual, known as WaMu, worked out minor, final wording changes with creditors.
Walrath denied a request by shareholders to put off the hearing today in Wilmington, Delaware, on the disclosure statement. The investors asked Walrath to delay a vote until a court-appointed examiner issues a report on the failure of Washington Mutual’s former bank, the biggest bank failure in the U.S.
The liquidation plan would divide $7 billion among creditors and is based on a settlement among Seattle-based Washington Mutual, known as WaMu, JPMorgan Chase & Co., which bought the failed bank, and the Federal Deposit Insurance Corp., which is overseeing the distribution of bank assets to bank creditors in a separate legal proceeding.
That settlement has the support of all the creditors who have any realistic chance of getting part of their debts repaid, noteholder lawyer Tom Lauria told Walrath.
“The report is not going to change how everyone is going to vote,” Lauria said.
One insurance unit of WaMu would be reorganized under the plan and exit bankruptcy. That unit could be worth as much as $150 million, shareholder attorney Justin Nelson said in court.
WaMu filed for bankruptcy 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.
Under the company’s voting process, creditors have until Nov. 15, two weeks after the examiner’s report is made public Nov. 1, company attorney Brian Rosen said in court.
Walrath will take the votes into consideration when she decides whether to approve the plan after a hearing scheduled for Dec. 1.
Shareholders and some lower-ranking creditors oppose the plan. Shareholders argued in court papers that WaMu could raise as much as $30 billion by filing lawsuits related to the takeover of its bank.
Shareholders have long claimed that the takeover was invalid.
WaMu, JPMorgan and the FDIC have agreed not to sue each other over the takeover and to split cash and tax refunds worth about $10 billion.
As part of the voting, creditors will be asked to promise not to sue as well.
The case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).