Official Committee of Equity Security Holders of Washington Mutual Inc. Secures Sizeable Recovery for Equity Holders

On February 24, 2012, the United States Bankruptcy Court for the District of Delaware confirmed the Seventh Amended Plan of Reorganization of Washington Mutual, Inc. (the “Seventh Amended Plan”).  A copy of the Bankruptcy Court’s confirmation order can be found here and the Bankruptcy Court’s ruling confirming the Seventh Amended Plan can be found here.

Previously, by order dated September 13, 2011, the Bankruptcy Court sustained the objections of the Official Committee of Equity Security Holders (the “Equity Committee”) on key issues including the value of the reorganized debtor and the proper rate of postpetition interest to be applied to creditors’ claims.  In addition, the Bankruptcy Court granted the Equity Committee standing to pursue a complaint seeking equitable disallowance of claims held by certain creditors who participated in the formation of the proposed plan.

The Seventh Amended Plan incorporates a settlement of the Equity Committee’s objections to confirmation as well as the claims for equitable disallowance.  The settlement provides, among other things, that current WMI equity holders will receive 95% of the equity in the reorganized debtor; senior creditor classes will contribute $75 million of cash to the reorganized debtor; and certain senior creditors will provide the reorganized debtor with $125 million in financing on terms favorable to the reorganized debtor.  In addition, the reorganized debtor will have the benefit of a net operating loss of over $5 billion.  Current WMI equity holders also received the right to appoint (i) a majority of the members of the reorganized debtor’s board of directors, (ii) several members to the Trust Advisory Board, which will oversee the liquidation of the Debtors’ remaining assets, and (iii) a majority of the members to the Litigation Subcommittee, which will oversee the prosecution of litigation claims.

A team of Ashby & Geddes’ bankruptcy attorneys, including Bill Bowden, Greg Taylor, Ben Keenan and Stacy Newman, serve as bankruptcy counsel to the Equity Committee.