"DJ Washington Mutual Blames FDIC Takeover For Plan Delay
By Peg Brickley Of DOW JONES NEWSWIRES
The former parent of Washington Mutual Bank blames federal regulators for stirring up uncertainty about who´s entitled to the billions in cash stashed in its accounts during the thrift´s takeover.
Washington Mutual Inc. (WAMUQ), WaMu´s former parent, is due to file a Chapter 11 plan by Saturday. On Tuesday, it asked a bankruptcy judge to move the plan filing deadline to April 24, blaming the chaos left by the September 2008 seizure and sale of WaMu.
"That seizure almost completely stripped [the parent company] of...employees and business records," lawyers for Washington Mutual Inc. wrote in papers filed in the U.S. Bankruptcy Court in Wilmington, Del.
"It also caused significant uncertainty about the legal status of some of [the parent company´s] most significant assets, including several billions of dollars originally on deposit" with WaMu and an affiliate, company attorneys said. (This article also appears in Daily Bankruptcy Review, a publication from Dow Jones & Co.)
The parent company filed for Chapter 11 protection one day after its corporate crown jewel was taken away by regulators and sold to JPMorgan Chase & Co. (JPM).
Now, JPMorgan, federal regulators and WaMu creditors are all threatening to lay claim to more than $4 billion in cash that was in Washington Mutual Inc.´s bank accounts at the time of the takeover.
The controversy over the cash and brewing trouble over other big assets, such as a potential tax refund, arose partly because the deal to sell WaMu to JPMorgan left room for argument about what the investment bank was buying.
Tuesday´s filing by the parent company says the regulatory takeover of WaMu "complicated what would otherwise be a straightforward restructuring or liquidation," so it needs more time to formulate its Chapter 11 plan.
For the first 120 days after filing a Chapter 11 petition, only a troubled corporation has the right to propose a restructuring plan. The deadline can be pushed back by a judge if the company demonstrates a reason for needing more time.
Washington Mutual Inc. says that with debts of more than $7 billion, its bankruptcy case is "among the largest ever filed."
-By Peg Brickley, Dow Jones Newswires; 302-521-2266; peg.brick...@dowjones.com
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