7:58 PM
WaMu examiner dampens hopes for shareholders
Addison Ray
By Tom Hals
WILMINGTON, Delaware | Mon Nov 1, 2010 7:28pm EDT
WILMINGTON, Delaware (Reuters) - Shareholders of Washington Mutual Inc are "highly unlikely" to recover anything from the bankruptcy stemming from the biggest bank failure in U.S. history, a court-appointed examiner said on Monday.
The examiner wrapped up a three-month investigation into an agreement between JPMorgan Chase & Co and a federal regulator aimed at ending Washington Mutual's two-year bankruptcy.
His conclusions were welcomed by the company, but will be a blow to shareholders, who stand to get nothing under the company's proposed reorganization.
The examiner, Joshua Hochberg, determined that "the proposed settlement will most likely result in no recovery for any classes of shareholders under the plan. The examiner also concludes that further litigation concerning any disputed asset is highly unlikely to materially to benefit classes that are 'out of the money.'"
An attorney for the official committee of equity holders declined to comment.
The report digs through the final months leading up to Washington Mutual's collapse into Chapter 11 the day after regulators seized its bank operations and sold them to JPMorgan Chase & Co for $1.9 billion.
The bank's failure came at the height of the 2008 financial panic and followed a $16 billion run on deposits.
The report recalls the fears at the time of a wider financial meltdown, concerns about Washington Mutual's hidden toxic assets and FDIC jitters that its deposit insurance fund would be rendered insolvent by a large bank failure.
What the 353-page report does not uncover is a smoking gun.
The examiner did not seem to find conspiracies to benefit JPMorgan while wiping out the investments and life savings of thousands of Washington Mutual shareholders, as some shareholders had hoped.
"The examiner's report reaffirms our long-standing belief that the global settlement agreement will result in significant recoveries for the estate's stakeholders and is in the best interests of the estate," said a statement from Washington Mutual.
Hochberg was charged with examining a settlement among JPMorgan, the Federal Deposit Insurance Corp and Washington Mutual over how to divide billions of dollars in disputed assets such as tax refunds and bank deposits.
That settlement forms the basis for the company's plan to distribute more than $7 billion to creditors and end Washington Mutual's two years in bankruptcy. The plan has wide support among creditors.
The report did find the bidding process for the seized bank was "less than optimal," citing contacts between FDIC Chairman Sheila Bair and JPMorgan's chief executive, Jamie Dimon.
JPMorgan declined to comment.
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