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Washington Mutual eyes bankruptcy exit in February
December 8, 2011 / 4:57 PM / 6 years ago

Washington Mutual eyes bankruptcy exit in February

WILMINGTON, Delaware (Reuters) - Washington Mutual Inc hopes to resolve its three-year bankruptcy in February and may file an agreement stemming from ongoing mediation as soon as Monday, the company’s attorney said on Thursday.

A customer leaves a bank branch at the Washington Mutual headquarters in downtown Seattle, Washington, September 26, 2008, a day after federal regulators seized the company and sold its branches, deposits and loans to JPMorgan Chase in the largest bank failure in U.S. history. REUTERS/Robert Sorbo

After rejecting in September Washington Mutual’s second attempt to end its bankruptcy, the judge overseeing the case ordered the parties into mediation to resolve objections.

Washington Mutual attorney Brian Rosen said mediation continued “nonstop” and he said it was possible the company might file an update on the talks on Monday.

Rosen asked the bankruptcy judge, Mary Walrath, to set aside January 11 for a disclosure statement hearing, which reviews documents that creditors will use to guide their vote to approve or reject a plan of reorganization.

He said it might be possible to hold a February hearing to confirm the plan, which sets out how the company will repay about $7 billion to creditors.

Washington Mutual has languished in Chapter 11 bankruptcy since regulators seized its savings and loan in September 2008 in the biggest bank failure in U.S. history.

The Washington Mutual banking business was sold to JPMorgan Chase & Co immediately after being seized.

In September, Walrath rejected the company’s second attempt to end its bankruptcy. She also found that shareholders might have a claim that four hedge funds that negotiated Washington Mutual’s plan used information from the plan talks to profit on trades of the company’s securities.

However, Walrath did not allow shareholders to pursue those insider trading claims pending mediation.

Washington Mutual’s bankruptcy plan is unlikely to provide anything for the company’s shareholders.

The company’s common stock was down about 1.4 percent at 6.3 cents in pink sheet trading.

The case is In re Washington Mutual, U.S. Bankruptcy Court, District of Delaware, No. 08-12229.

Reporting by Tom Hals, editing by Matthew Lewis

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