WILMINGTON, Del. – Creditors who stand to receive nothing under Washington Mutual Inc.’s reorganization plan are trying to block court approval of the plan, attorneys for WMI and supporters of the plan told a Delaware bankruptcy judge on Wednesday.
Attorneys for WMI, JPMorgan Chase & Co. and the Federal Deposit Insurance Corp. accused Washington Mutual’s official equity holders committee and a group of investors who purchased certain securities of trying to block confirmation of the plan in order to win concessions from other creditors.
The proposed reorganization plan is based on settling lawsuits that pitted Washington Mutual, the FDIC and JPMorgan against one another after the FDIC seized WaMu’s Seattle-based flagship bank in 2008 and sold its assets to JPMorgan for $1.9 billion in the largest bank failure in U.S. history.
Under the proposed settlement, the competing lawsuits would be dismissed and some $10 billion in disputed assets would be distributed among Washington Mutual, JPMorgan and the FDIC.
Judge Mary Walrath ruled in January that the proposed settlement was reasonable, but she refused to confirm WaMu’s plan until certain changes were made.
Attorneys for the equity committee appealed Walrath’s ruling and argue that four hedge funds used information gained in settlement negotiations to engage in insider trading.