Washington Mutual Global Settlement Over Cash, Refunds Approved by FDIC
The Federal Deposit Insurance Corp. said it agreed to settle its dispute with bankrupt Washington Mutual Inc. over the biggest U.S. bank failure.
The FDIC’s board approved a global settlement that resolves claims over its role as receiver in the September 2008 takeover of Washington Mutual Bank, the agency said today in a statement. The agreement also settles claims between Washington Mutual and JPMorgan Chase & Co., which acquired the failed bank, according to the statement.
“This agreement will result in substantial recoveries to the receiver and resolve potential claims that could have taken years and millions of dollars to litigate,” FDIC General Counsel Michael Bradfield said in the statement.
The settlement requires approval from a federal bankruptcy judge in Wilmington, Delaware, the FDIC said.
The terms of the agreement weren’t included in the statement. Washington Mutual said in court documents that, under the agreement, the FDIC would get as much as $850 million from tax refunds worth as much as $5.8 billion.
WaMu, as the holding company is called, filed for bankruptcy the day after the takeover of its Washington Mutual Bank unit by the FDIC. Before it failed, the bank had more than 2,200 branches and $188 billion in deposits.
WaMu, its bondholders and the official committee of unsecured creditors support the proposed settlement that would split the tax refunds and other assets with JPMorgan Chase and the FDIC, both of which claimed WaMu owed them money. WaMu, its bondholders and other creditors have considered suing to recover money to pay about $7 billion in debt, mostly to bondholders.
Shareholders would get nothing under a proposed liquidation of most of the company’s remaining assets, which include $4 billion in cash in addition to the tax refunds.
Once the FDIC deal is approved, shareholders will be the only major opponents left to WaMu’s reorganization plan.
Shareholders have said in court papers that WaMu could collect as much as $20 billion from lawsuits, tax refunds and the deposits held by JPMorgan.
In June, WaMu will seek permission to send its reorganization proposal to creditors for a vote, the first step toward winning final court approval.
The bankruptcy case is In re Washington Mutual Inc., 08-12229, and a related financial dispute is Washington Mutual Inc. v. JPMorgan Chase Bank NA, 09-50934, U.S. Bankruptcy Court, District of Delaware (Wilmington).