Washington Mutual Inc reached agreement with the Federal Deposit Insurance Corp on an amended plan of reorganization, bringing the company closer to exiting bankruptcy, according to court documents filed Monday.
Washington Mutual said the settlement will allow it to distribute $7 billion to creditors.
The bank filed for bankruptcy in 2008 after regulators seized its lending operations, which were sold by the FDIC to JPMorgan Chase & Co for $1.9 billion.
The three parties have been fighting over deposits that Washington Mutual had at the operations sold to JPMorgan and about billions of dollars in tax refunds.
In March the parties announced a settlement, but the deal was not approved by the board of the FDIC.
According to a court filing on Monday, continued negotiations between Washington Mutual and the FDIC led to a revised settlement agreement with the parties and other creditors.
The debtors, JPMC (JPMorgan), the FDIC Receiver and FDIC Corporate, the Settlement Noteholders and the Creditors Committee have agreed to compromise, settle and release, as to the parties thereto, certain issues in dispute, the filing said.
The benefits of ending further legal fights likely outweigh any gains that might be achieved in court, Washington Mutual said in the filing.
Under the terms of the deal, Washington Mutual will receive $4 billion of deposits it had with the operations sold to JPMorgan, and $2.3 billion to $2.6 billion of tax refunds.
The FDIC and Washington Mutual did not immediately return calls seeking comment.
The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware (Wilmington), No. 08-12229.
(Reporting by Tom Hals; editing by John Wallace)