Washington Mutual Inc said it could receive an additional $2.6 billion in tax refunds due to a recently enacted law, sending shares of the bankrupt bank holding company soaring on Thursday.
The added money could also help resolve various legal disputes surrounding the company's collapse last year, one analyst said.
Washington Mutual could receive the additional refund following the enactment in November of a law that permits net operating losses to be carried back for five years, from two years previously. That change would double the company's expected refund, according to a court filing on Wednesday.
The company's preferred shares rocketed nearly 50 percent to $59.48 while its common stock rose about 11 percent to 13.71 cents, in pink sheet trading.
One analyst said the refund could clear the way for a settlement of the bankruptcy case, which has been bogged down in disputes over claims to company's assets.
It could be one of the main mechanisms of fostering a settlement. The apportionment of the refund could make all the sides happy, said Kevin Starke, senior vice president at CRT Capital Group in Stamford, Connecticut.
The company's main asset is a deposit of about $4 billion that is also claimed by JPMorgan Chase & Co Inc , which bought Washington Mutual's failed bank operations from a government agency for $1.9 billion last year.
JPMorgan also has said it has a claim on some of Washington Mutual's tax refunds, which until the law change were estimated at up to $3 billion. The refunds and deposit are the company's largest assets.
Earlier this month, an office within the U.S. Trustee asked Washington Mutual to provide a list of its shareholders so it could survey them for their interest in serving on an official committee representing equity holders.
Shareholders are generally the last creditors to receive a distribution and such a committee is usually opposed by the U.S. Trustee unless shareholders can prove they can reasonably expect a distribution after all creditors have been paid.
Washington Mutual said in its operating report for November it had $8.3 billion of liabilities.
Washington Mutual and the U.S. Trustee's office could not be immediately reached for 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 Tim Dobbyn)