Washington Mutual reorganization plan gets support of three of four groups; hearing Aug. 24

By Jim Witters

Wilmington, Del., Aug. 10 - Washington Mutual Inc.'s reorganization plan drew support from three of four groups who filed documents Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

The noteholders group, the official committee of unsecured creditors and Wells Fargo Bank, acting as Piers trustee, each filed declarations of support for the plan's final confirmation.

The dime litigation tracking warrant holders oppose confirmation.

A hearing is scheduled for 9:30 a.m. ET on Aug. 24.

Opposing confirmation were Nantahala Capital Partners LP, Blackwell Capital Partners LLC, Axicon Partners LLC, Brennus Fund Ltd., Costa Brava Partnership III LP and Sonterra Capital Master Fund Ltd. for themselves and as class representatives.

The opponents claim the noteholders exerted undue influence over settlement negotiations, with J.P. Morgan Securities LLC and the Federal Deposit Insurance Corp. They said that influence is reflected in four aspects of the current plan:

• Paying post-petition interest at the contract rate and not the federal judgment rate;

• The Piers are improperly being compensated for their equity warrant;

• The stock election for Reorganized WMI has been manipulated to discourage other creditors from participating;

• The value of the reorganized WMI was set at an artificially low number, which will provide an excessive distribution for the electing stockholders of reorganized WMI, primarily the Piers.

The noteholders and others filing Wednesday said all negotiations were above board.

"From the beginning of these cases, the single most significant threat to creditor recoveries has been the myriad of litigation claims and multitude of issues between, among others, the debtors, JPMorgan Stanley and the FDIC, that taint virtually all of the debtors' assets. In the end, the debtors successfully negotiated and achieved a settlement that brings to the estates billions of dollars and removes billions of dollars of uncertainty and potential liabilities," the noteholders wrote.

They said the settlement makes available more than $7 billion in cash for distribution, "providing near payment in full to all creditors."

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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