From govinsider (the other board)
Washington Mutual Bondholders Defy JPMorgan On Disclosure
By PEG BRICKLEY
Of DOW JONES NEWSWIRES
In a dispute that turns the spotlight on the dynamics of investing in bankrupt companies, 30 hedge funds and banks are fighting a bid to force them to divulge details of their trading in the debt of Washington Mutual Inc., the former parent of Washington Mutual Bank.
The battle has erupted in the parent company's bankruptcy case, where bondholders have been giving JPMorgan Chase & Co. (JPM) a rough time over its $1.9 billion purchase of the ailing thrift.
JPMorgan insists it gets to keep some $4 billion in cash, more billions in tax returns and other extras, along with WaMu's banking business.
Parent company bondholders say the cash, the refunds and the extras belong to them. They joined forces early on to fight JPMorgan in the parent company's bankruptcy proceedings, hoping to improve their chances of recovery.
The bondholders have spoken out in court as a group, filed papers and got a seat at the bankruptcy bargaining table, a crucial advantage to protecting their chances of collecting their debts.
In March, WaMu parent company bondholders participated in settlement talks with regulators, the parent company, JPMorgan and the official creditors committee, court documents say.
Investors are hoping for a deal to end the complex litigation over WaMu's collapse, so they can get paid earlier rather than later. Settlement negotiations ended March 24, when JPMorgan filed a lawsuit against the parent company.
Earlier this month, JPMorgan asked a bankruptcy judge to order the parent company bondholders to say who they are, how much debt they hold, when they bought it, and what they paid for it. JPMorgan says it's entitled to know who it's up against, and how much they have riding on the outcome.
The list of parent company bondholders reads like a Who's Who of Wall Street. Affiliates of Goldman Sachs Group Inc. (GS), Deutsche Bank AG (DB), Citigroup Inc. (C), Bank of America Corp. (BAC) populate the roster, along with a couple dozen investment funds, court documents reveal. In the aggregate, they own $3.26 billion worth of debt issued by the bank holding company.
Aggregate holdings are all they want to report, according to a filing Wednesday in the U.S. Bankruptcy Court in Wilmington, Del. Disclosing their trading histories means tipping their hands in the debt markets, and that's unfair, bondholders said in court papers.
Trading in the debt of WaMu's parent company has been intense almost from the time in September 2008 when regulators seized WaMu and sold it to JPMorgan.
Such speculation is not for the small player, with prices at 87.5 cents on the dollar and debt trading regularly in lots of $1 million or more.
In Wednesday's filing, however, parent company bondholders who formed a "noteholders group," say they chipped in to hire lawyers to save money, but aren't really a committee. The rules for disclosing claims trading data, therefore, don't apply to them, the parent company bondholders say.
Lawyers from White & Case and Kasowitz Benson Torres & Friedman represent one group of bondholders, and insist they heeded the rules about naming the names of their multiple clients.
Wednesday, they accused JPMorgan of seeking tactical advantage by preying on the "sensitivity creditors generally have with respect to the disclosure of claims trading information."
AI
