Washington Mutual Inc
A Delaware bankruptcy judge indicated she will approve the company's disclosure statement, which describes how the company will distribute more than $6 billion to creditors, once it adds some information requested by creditors.
An attorney for the company told the judge he expects to make those changes soon.
Judge Mary Walrath rejected the company's previous bankruptcy plan in January, although at the same time she said that the plan fairly provides most of the money Washington Mutual will distribute to its creditors.
That settlement ended disputes left over from the seizure of the company's bank in 2008, the biggest bank failure in U.S. history, and its immediate sale by the Federal Deposit Insurance Corp to JPMorgan Chase & Co
That settlement provided the bulk of the more than $6 billion that the company will distribute to creditors, which range from hedge funds that own the company's notes to software companies and landlords.
Washington Mutual was once a stock market darling. But a lawsuit by the FDIC against former CEO Kerry Killinger and two other top executives last week described a bank undone by reckless leaders pushing risky mortgages during a housing bubble while ignoring risk managers.
The FDIC could recover millions more which would go to creditors of the bank.
A LONG WAIT
Shareholders have been waiting to be paid since the holding company filed for bankruptcy the day after the bank sale.
Opponents of the revised plan used Monday's hearing to test their arguments in front of the judge. They sparred over who can be shielded from being sued, the rate of interest used to calculate creditors' payouts and whether some securities are considered debt or equity.
The rate of interest could be significant, and if the judge decides the company should use a lower rate, it could free up more than $700 million, some of which will benefit preferred shareholders who otherwise will likely get little.
The issue is unsettled, setting up a key battle for the confirmation hearing scheduled for May 2.
The judge requested added disclosures such as estimates of the value of the reorganized company and possible values of various tax benefits owned by the reorganized company.
Washington Mutual has said it could reorganize around its mortgage reinsurance business, largely as a way to preserve tax benefits.
Shareholders long have argued that regulators jumped the gun in shutting down the bank and have accused JPMorgan of playing a role in the bank's downfall so it could buy WaMu's 2,000 branches and $188 billion in deposits at a steep discount.
The judge allowed individual shareholders to speak at the hearing and voice criticisms the company's plans.
The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-12229.
(Reporting by Tom Hals; Editing by Richard Chang)