BizJournals Portfolio

WaMu Settles Landmark Case

Washington Mutual’s bankrupt holding company reached a groundbreaking settlement with the FDIC and JPMorgan Chase, recovering more than $6 billion.

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JPMorgan Chase

Washington Mutual’s bankrupt holding company has reached a groundbreaking settlement with the Federal Deposit Insurance Corp. and JPMorgan Chase, recovering more than $6 billion in a move that is likely to help bondholders and shareholders of the failed bank recover some of their lost value, according to a source familiar with the deal’s terms.

The settlement, announced at a Delaware bankruptcy hearing Friday, ends months of legal wrangling among the three parties over billions of dollars left over after Seattle-based WaMu was seized by federal regulators in September 2008.

Washington Mutual Inc., the bankrupt holding company, has won back the roughly $4 billion in deposits at the center of the dispute, which make up the bulk of the holding company’s recovery, according to the source, who spoke on condition of anonymity.

The holding company also divvied up tax refunds with the FDIC and JPMorgan Chase & Co., which purchased the banking assets. Washington Mutual Inc. will receive the lion’s share of tax refunds, about $1.9 billion, the source said. The holding company received another $289 million from other funding sources that had been tied up in the bankruptcy, including what are known as “intercompany notes.”

“WMI is confident that this agreement will provide substantial recoveries for the company’s creditors and that it is consistent with WMI’s efforts over the last 18 months to maximize the value of its bankruptcy estate,” the company said in a statement. It declined to comment further. JPMorgan declined comment, and the FDIC couldn’t immediately be reached for comment.

It is unclear how the money will be divided among creditors. Bondholders and preferred shareholders will be first in line for the settlement, followed by common shareholders.

The holding company’s stock plummeted 54 percent to about 17 cents on the news Friday after recently reaching a trading high of 70 cents.


Kirsten Grind covers venture capital, private equity and money matters for Portfolio.com.

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