Mr Cooper Group Inc (COOP)

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Tuesday, January 12, 2010, 12:52pm PST

http://www.bizjournals.com/seattle/stories/2010/01/11/daily17.html

WaMu challenges new shareholders’ panel

Puget Sound Business Journal (Seattle) - by Kirsten Grind

Shareholders of Washington Mutual won a hard-fought battle Monday with the appointment of a committee that will represent them in court, but now the bankrupt holding company of the Seattle bank is trying to disband that group of shareholders.

The battle over shareholder rights is the latest issue that has arisen out of WaMu’s bankruptcy, a complex Chapter 11 case that continues to unfold more than a year after WaMu was seized by federal regulators in the largest bank failure in U.S. history.

Washington Mutual Inc., the holding company of WaMu, has filed a motion in U.S. Bankruptcy Court in Delaware objecting to the newly formed equity committee because of the additional cost and the disruption to the case, according to court documents. The equity committee represents millions of WaMu shareholders. The holding company declined to comment Tuesday.

“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,” according to the holding company’s motion.

Six Washington Mutual shareholders from across the country and one representative of a New Jersey-based hedge fund called Esopus Creek Value were appointed by the U.S. Trustee’s office in Delaware on Monday to sit on the equity committee. The group is responsible for representing shareholders in the holding company’s ongoing Chapter 11 bankruptcy. Its formation means that shareholders could have a shot at reclaiming some of the $7 billion in wealth that was lost when WaMu was closed.

Several members of the equity committee could not immediately be reached for comment. Joseph Criscione, the hedge fund representative, declined comment.

The holding company, in its 20-page motion to disband the equity committee, points out that the chance of WaMu shareholders recovering any money is very low, according to court documents.

The holding company’s latest operating report shows liabilities in excess of $1.3 billion over its assets, and preferred stockholders — who are paid before common stockholders in a bankruptcy case — are owed about $3.4 billion. Therefore, common shareholders would have to “overcome an approximately $4.7 billion to $8.7 billion deficit before receiving any money,” according to the complaint. That estimate also includes legal fees.

“Even in the best case scenario for the debtors, the debtors do not believe this deficit will be overcome,” the motion states.

In addition, the bankrupt holding company is involved in a separate court battle with New York-based JPMorgan Chase & Co. (NYSE: JPM), which acquired Washington Mutual, and the Federal Deposit Insurance Corp., which sold the bank to JPMorgan, over assets worth billions of dollars more.

If the court does not agree to break up the equity committee, the holding company is asking for a cap of $250,000 on fees and expenses, such as legal costs, related to the committee.