Bank holding company Washington Mutual Inc. has agreed to a settlement with some creditors involved in its Chapter 11 bankruptcy case and has filed a new reorganization plan.
Washington Mutual said in a statement late Monday that the settlement will allow it to distribute more than $7 billion to its creditors. The settlement must still be approved by the U.S. Bankruptcy Court for the District of Delaware.
"The comprehensive settlement announced today represents a fair and reasonable recovery for the thousands of equity holders of the company who have been following this case closely for three years," Michael Willingham, chairman of the committee of equity security holders appointed in the company's Chapter 11 proceedings.
Washington Mutual's bankruptcy case is three years old and its reorganization plans have twice been rejected by Bankruptcy Court Judge Mary Walrath. The company is hoping to exit bankruptcy protection by the end of February. It has a hearing scheduled for Jan. 11, 2012 in which the bankruptcy court will consider approval of the reorganization plan's disclosure statement. The company also plans to ask the bankruptcy court for a mid-February hearing to confirm its reorganization plan.
The Federal Deposit Insurance Corp. seized WaMu's Seattle-based flagship bank in 2008 and sold its assets to JPMorgan for $1.9 billion in the largest bank failure in U.S. history.
Under terms of the settlement, the reorganized assets of Washington Mutual will include equity interests in WMI Investment Corp. and WM Mortgage Reinsurance Co.
A reorganized Washington Mutual will receive $75 million in funding from certain creditors. Exit financing provided by settlement noteholders will include a $125 million senior secured credit facility that will be used to fund working capital as well as for general corporate purposes and eligible originations and acquisitions.
The majority of the reorganized company's common equity will be distributed to its current preferred and common equity holders. Its board will initially be made up of four members chosen by the equity committee and one member selected by lenders under the credit agreement.