WaMu shareholders form official bankruptcy group

Mon Jan 11, 2010 10:00pm EST

* Formed at request of U.S. Trustee

* WaMu asks court to disband panel

By Tom Hals

WILMINGTON, Del., Jan 11 (Reuters) - Shareholders of Washington Mutual Inc formed an official committee on Monday to represent them in the bankruptcy of the bank holding company, according to court documents.

The committee was formed at the request of the U.S. Trustee and it comes as Seattle-based Washington Mutual is nearing what is likely the final months of its bankruptcy.

The formation of a committee usually occurs at the beginning of a bankruptcy. Equity committees have been rare in bankruptcies during the current economic downturn as companies have tended to be insolvent and weighed down with secured debt, leaving no hope of recovery for shareholders.

Washington Mutual, which filed for bankruptcy in September 2008, immediately requested the court disband the panel, according to court documents.

"The debtors are baffled as to why the U.S. Trustee, at this late date, would choose to saddle these estates with another committee and, presumably, professionals that will needlessly incur significant fees and expenses," the company said in court papers.

The Wilmington, Delaware, meeting of shareholders was hosted by the U.S. Trustee and drew about two dozen mostly retail investors from across the country. Individual investors have been actively following the case and pressing for official recognition through informal groups.

One group has been led by Joyce Presnall, who will sit on the official committee along with other individual investors and Esopus Creek Value, a Short Hills, New Jersey, hedge fund that is active in distressed companies.

Washington Mutual shares rallied recently after the company said it may receive an additional tax refund of up to $2.6 billion, increasing the likelihood of some recovery for equity holders.

The committee will be represented by firms Venable and Benesch, Friedlander, Coplan & Aronof.

The company's common shares WAMUQ.PK fell 3.7 percent to 18.2 cents while its preferred shares WAMPQ.PK rose 10.6 percent to $82.35.

The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-12229. (Editing by Gary Hill)