WaMu seeks access to $5 bln deposit at JPMorgan
Fri Oct 3, 2008 12:16pm
WILMINGTON, Delaware, Oct 3 (Reuters) - Washington Mutual Inc WAMUQ.PK, the bankrupt holding company of the failed regional bank, is seeking to access a $5 billion cash deposit JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) gained control of when it took over its deposits last week, a Washington Mutual lawyer said on Friday.
In first-day motions in U.S. bankruptcy court in Delaware, concerns about the status of the $5 billion deposit dominated the proceedings.
"It is our understanding that those deposits were taken as part of the transaction with JPMorgan," Marcia Goldstein, a bankruptcy lawyer representing Washington Mutual, said in court.
"They (JPMorgan) have indicated to us that they would like some opportunity to review the facts that are related to those assets," she continued.
Washington Mutual was closed by the U.S. government last week in the largest bank failure by far in the United States, and its banking assets were sold to JPMorgan for $1.9 billion.
In a U.S. Securities and Exchange Commission filing this week, the holding company said it had $5 billion of cash deposited with Washington Mutual Bank prior to it being taken over by U.S. banking regulators.
Goldstein said the company had reached a "standstill agreement" with JPMorgan that would require both parties to give each other 48 hours notice if WaMu seeks to withdraw the deposit or either party decides to take any court action related to the deposit.
"Even JPMorgan might have trouble with a withdrawal request of $5 billion," Goldstein said.
The $5 billion could potentially be used to pay creditors of the holding company.
"It sounds very unusual for the holder of a $5 billion account not to be able to make withdrawals from that account," Thomas Lauria, a lawyer representing a group of note holders in the case, told the court.
The standstill agreement is in effect until Oct. 15, Goldstein said.
Goldstein also said at the hearing that WaMu was not seeking outside bankruptcy financing at the time, as it currently has "adequate cash" to fund the costs of the bankruptcy process. (Editing by Brian Moss)
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