Washington Mutual litigation tracking warrant reps oppose plan changes

By Caroline Salls

Pittsburgh, June 16 - Washington Mutual, Inc.'s dime litigation tracking warrant class representatives objected to the company's modified sixth amended plan of reorganization, arguing that the modified plan does not address the issues that led the U.S. Bankruptcy Court for the District of Delaware to deny confirmation of the previous version, according to a Thursday court filing.

As previously reported, the court denied confirmation of the sixth amended plan on Jan. 7.

According to the objection, Washington Mutual said at a June 9 status conference that it might file a seventh amended plan based on a tentative settlement with its equity committee.

However, the class representatives said their objection is based only on the modified sixth amended plan.

The class representatives said the company refused to clarify treatment of the tracking warrant claims in the modified plan.

Instead, the class representatives said the proposed plan changes "made matters worse" by adding language that leaves open the possibility that the litigation tracking warrant holders could be placed in late filed claims or subordinated debt claims class.

"It is hard to conceive how the debtors can fairly argue that the LTW holders are both debt (Class 18) and equity (Class 21)," the representatives said in the objection.

"It would seem that, by virtue of the modified plan, the debtors would be required to take a position.

"Further, since the modified plan provides for payment of post petition interest, and the confirmation order provided that late filed claims get paid ahead of post petition interest claims, it is not clear at all why there is a class 12A (late filed claims) under the modified plan."

In addition, the class representatives said Washington Mutual is largely responsible for the costly delay it cited to the court in an effort to have the plan confirmed quickly.

Specifically, the representatives said the company submitted a plan containing provisions related to third-party releases, "which simply were contrary to established law."

Washington Mutual also delayed the process by delaying adjudication of objections to the plan and not including a provision that would allow the court to change "offending provisions" to render a plan confirmable.

"The debtors' legal strategy was clear: start the confirmation train running even if the plan had infirmities, and give the court only an all or nothing scenario and hope that the desire to achieve a confirmation will trample over legitimate section 1129 objections to confirmation raised by aggrieved parties in interest," the objection said.

The plan confirmation hearing is scheduled for July 5.

Washington Mutual, a Seattle-based savings and loan holding company, filed for Chapter 11 bankruptcy on Sept. 26, 2008. Its Chapter 11 case number is 08-12229.

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