Mr Cooper Group Inc (COOP)

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By Peg Brickley
Of DOW JONES DAILY BANKRUPTCY REVIEW


Pressure is mounting on Washington Mutual Inc. (WAMUQ) as creditors unhappy
about the continued turmoil in the Chapter 11 case are now calling for the
company's bankruptcy to be converted into a Chapter 7 proceeding.

Bondholders of Washington Mutual's seized thrift Washington Mutual Bank, or
WaMu, are joining a demand from other investors to switch the reorganization
case to a flat-out liquidation, according to court papers filed Thursday. The
initial move to convert came from investors owed $2.3 billion by the bank
holding company.

Now the thrift's bondholders are also saying there's little point in allowing
parent's proceeding to continue as a Chapter 11 case.

"Despite having over 18 months and collecting an extraordinary amount of
professional fees (some $80 million), the professionals running (Washington
Mutual) have been unable to negotiate a deal that all parties with real
economic interests can accept," lawyers for WaMu bondholders said.

WaMu bondholders said the settlement that is supposed to be the foundation of
Washington Mutual's Chapter 11 exit plan still lacks critical signatures.

There are "conspicuously blank" lines in court documents where there should
be signatures from hedge funds connected to Appaloosa Management, Centerbridge
Capital Partners, Aurelius Capital Partners, and Owl Creek Asset Management,
the WaMu bondholders said in papers filed in U.S. Bankruptcy Court in
Wilmington, Del.

Even if all the signatures line up, the settlement won't mean a quick end to
the questions about who is responsible for WaMu's collapse, attorneys for the
bondholders say.

The initial impetus for the drive to convert Washington Mutual's Chapter 11
case, one of the largest in the country, into a Chapter 7 liquidation stemmed
from fear shareholders will succeed in their bid to oust the company's board.

Washington Mutual shareholders are seeking to vote out the Seattle bank
holding company's board of directors in order to block a bankruptcy deal that
leaves them with nothing.

If shareholders are able to take over the company and take control of the
bankruptcy proceeding, Washington Mutual's Chapter 11 plan will be derailed.

A group of Washington Mutual bondholders urged that the company be put into
the care of a Chapter 7 trustee, instead of being left vulnerable to a
shareholder takeover.

Such a move would head off the expense and trouble of a Chapter 11
confirmation fight, they said. Conversion wouldn't hurt the bank-less bank
holding company, which is, in essence, a "synthetic" shell run by bankruptcy
lawyers, they said in court filings.

Shareholders countered that the move to knock the case out of the Chapter 11
list and convert it to a simplified Chapter 7 liquidation is a ploy designed to
defeat their valid exercise of corporate governance rights.

The matter is scheduled for discussion next week in bankruptcy court, where
Washington Mutual will seek permission to send its Chapter 11 plan out for
creditor votes.

The plan sets out the distribution scheme for roughly $7 billion in cash
Washington Mutual hopes to gather, most of it from a settlement over the loss
of WaMu.

The takeover of the thrift spawned a frenzy of finger pointing. WaMu's
leaders have been blamed for the collapse, as have regulators who were supposed
to oversee the thrift, former owner Washington Mutual, and new owner J.P.
Morgan Chase & Co (JPM).

If it is ultimately approved, Washington Mutual's plan would provide a shield
against liability for many who might otherwise be sued over WaMu's collapse.


(Dow Jones Daily Bankruptcy Review covers news about distressed companies and
those under bankruptcy protection.)


-By Peg Brickley, Dow Jones Daily Bankruptcy Review; 302-521-2266;
[e-mail]


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05-28-10 1410ET

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14:10 052810