More Strife in the Washington Mutual Bankruptcy Case
On Monday, Washington Mutual shareholders were victorious is their battle to appoint an equity committee to represent them in court with regard to the failed bank’s Chapter 11 bankruptcy filing over one year ago. WaMu’s highly publicized bankruptcy included seizure by federal regulators in this, said to be the largest bank failure in United States history. Pressing forward, the complex bankruptcy case continues with strife as the appointed equity committee, comprised of 6 Washington Mutual shareholders and one New Jersey Representative from Eopus Creek Value (a hedge fund), is challenged by Washington Mutual Inc., WaMu’s now bankrupt holding company.
The committee, appointed by the U.S. Trustee’s Delaware office, would represent the shareholders, potentially allowing them to recoup some of the $7 billion that was lost when Seattle-based Washington Mutual filed Chapter 11 and closed its doors. Fierce objection comes from Washington Mutual Inc., who filed a motion in Delaware’s U.S. Bankruptcy Court citing unnecessary additional costs and overall disruption of the case. The holding company declined to comment as of Tuesday, but their 20-page motion states, “The debtors are baffled as to why the U.S. Trustee, at this late date, would choose to saddle these estates with another committee and, presumably, professionals that will needlessly incur significant fees and expenses,” and thus requests disbanding the equity committee stating that the likelihood of shareholders being awarded any money is slim. It states, “Even in the best case scenario for the debtors, the debtors do not believe this deficit will be overcome.” Washington Mutual Inc.’s current operating report reflects $1.3 billion in liability over asset and because the bankruptcy case allows preferred stockholders to be paid prior to common stockholders, and that debt is in excess of $3.4 billion, the common shareholders would not be paid until the deficit of up to $8.7 billion was satisfied.
If Washington Mutual Inc.’s motion is declined and the equity committee is not dissolved, the motion requests a $250,000 cap on legal costs and other fees for the committee.
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