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WaMu hit by hitch on exit of chapter 11

City A.M. Reporter
WASHINGTON Mutual’s effort to exit bankruptcy encountered a setback yesterday when the judge in the case ordered the company to talk further with shareholders about their requests for documents.

The bank holding company had sought approval of its disclosure statement, which must be cleared by a bankruptcy court before it can be sent to those voting on the reorganisation.

Bankruptcy Judge Mary Walrath declined to hear arguments on the hundreds of objections to the disclosure statement. Instead, she ordered lawyers for the company to discuss requests for information by attorneys for shareholders and bondholders and report back on 17 June. She also postponed discussions of the disclosure statement until that time.

Shareholders want to investigate the collapse of Washington Mutual Bank in 2008, the biggest bank failure in US history and the event that pushed the holding company into bankruptcy.

They also want to know more about a settlement of lawsuits among JPMorgan Chase, Washington Mutual and the Federal Deposit Insurance Corp that is central to the bank holding company’s reorganisation plan.

That deal divides disputed assets and provides about $7bn (£4.8bn) to distribute among creditors. Shareholders would receive nothing. Shareholders want information on what legal claims are resolved by the settlement, how those claims were valued and if those valuations are fair. They think the firm’s assets, including legal claims, could be worth $20bn.