Washington Mutual wins ruling on limiting trading
NEW YORK (Reuters) - A U.S. bankruptcy judge ordered on Friday that trading be limited in Washington Mutual Inc (WAMUQ.PK) stock, a move that the largest U.S. lender ever to fail said could help it protect billions of dollars of tax breaks.
Judge Mary Walrath of the U.S. bankruptcy court in Wilmington, Delaware, found that unrestricted trading of common and preferred stock during Washington Mutual's bankruptcy case "could severely limit" the company's ability to use the tax benefits. Washington Mutual estimated it has more than $20 billion of losses that could qualify for the benefits.
The interim order covers "substantial equityholders" who own or plan to amass a least 4.75 percent of the thrift's common stock, or roughly similar stakes in preferred stock issues. Walrath scheduled a final hearing for November 14.
Separately, the judge authorized the appointment of William Kosturos as chief restructuring officer, and Alvarez & Marsal as restructuring adviser. The firm received a $250,000 retainer, and would be paid $695 an hour for Kosturos' work.
Seattle-based Washington Mutual filed for bankruptcy protection on September 26, a day after the Federal Deposit Insurance Corp seized its banking units and sold them to JPMorgan Chase & Co (JPM.N) for $1.9 billion. The bankruptcy covers the holding company, not the banking business.
Washington Mutual had argued that its consolidated net operating tax loss carryforwards and unrecognized losses were "valuable assets" because U.S. tax law generally lets companies carry over losses and tax credits to offset future income, lowering taxes owed to the government.
The FDIC had opposed Washington Mutual's request, arguing that carryforwards belong to the entity that actually incurred the loss, and said it might fight for rights it might have to related benefits. JPMorgan, meanwhile, wanted to be sure any court orders would not affect tax benefits to which it was entitled.
Washington Mutual, the holding company, had $8.17 billion of debts as of September 26, according to its bankruptcy petition.
The FDIC had no immediate comment. JPMorgan declined to comment.
(Reporting by Jonathan Stempel; Additional reporting by Elinor Comlay, editing by Gerald E. McCormick)
