Aurelius withdraws support of WaMu bankruptcy plan

AP News
Posted: Jun 23, 2011 12:24 PM
Aurelius withdraws support of WaMu bankruptcy plan

Washington Mutual Inc.'s bankruptcy reorganization plan is now being challenged by a hedge fund that supported it.

The plan is based on the settlement of lawsuits that pitted Washington Mutual, the Federal Deposit Insurance Corp. and JPMorgan Chase against one another after the FDIC seized WaMu's flagship bank in 2008 in the largest bank failure in U.S. history. The assets were sold to JPMorgan.

Aurelius Capital Management said Wednesday that WaMu has been denied access to some $4 billion in cash improperly held by JPMorgan, which is paying far less interest to WaMu under the settlement than it would otherwise. Aurelius says that with WaMu being deprived of that value and incurring mounting bankruptcy costs, the settlement has become more valuable to JPMorgan than to Washington Mutual.