Washington Mutual Bankruptcy
Washington mutual bankruptcy marks the largest case of a bank failure. Washington mutual was a popular savings bank and the largest loan and savings association in the United States until it collapsed in 2008. Washington Mutual filed for bankruptcy on 26th September 2008 and it was eventually delisted from the stock exchange in New York.
The saga that led to filing for bankruptcy started at the onset of global economic crisis. It began on15th September 2008, which was the day when Lehman Brothers filed for bankruptcy sparking a crisis. Lehman Brothers filed for bankruptcy due to the subprime mortgage loan crisis. In one year, price of the stock of this company dropped from a share of $30 to $2.
As a result, Washington Mutual’s customers withdrew deposits amounting to $16.7 billion in a span of 10 days from Washington Mutual after the Lehman Brothers’ case. This prompted the government to place this company under the FDIC control. FDIC sold its assets to the JPMorgan Chase at 1.9 billion. As the Washington Mutual’s receiver, the FDIC retained the claims Washington Mutual held against the other parties.
The move to sell the assets of the firm made debtors to file chapter 11 petitions. Eventually, disputes emerged between FDIC, JPMC, debtors and other interested parties. The disputes were centered on propriety of JPMC sale and multiple assets’ ownership. There were also angered litigations in different jurisdictions.
A global settlement agreement also known as GSA was announced in March 2010. This was incorporated in Sixth Amended Plan. In an order and opinion dated 7th January 2011, the conclusion made by the court was that the announced GSA was reasonable and fair. However, the court did not confirm Sixth Amended Plan stating that it had too broad injunction, release as well as exculpation provisions.
In a bid to address the concerns of the court, the GSA and Sixth Amended Plan were modified on 16th and 25th March 2011. FDIC, JMC, Creditors’ committee, WMI senior group of note-holders, debtors and the other parties supported the modified Sixth Amended Plan. However, equity committee, litigation tracking warrants holders, some WMB note-holders, other creditors and share holders opposed the Amended plan.
Those opposed to the plan argued that settlement negotiations were marred by improper trading. They alleged that improper trading formed the basis of their objection. According to them, the proposal of the modified plan was not in good faith and that note-holder’s settlement should be disallowed equitably.
An examiner was appointed by the court at the request of the equity holders of WMI. The examiner investigated the claims thoroughly to determine whether the settlement proposed was equitable and fair. Findings of the examiner revealed that this settlement provided a fair resolution.
On 24th February 2012, the court entered the order to confirm a Seventh Amended Plan as proposed by the WMI and co-debtor. On 19th March 2012, the settlement and plan became effective.
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