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Published by: DinSFLA on Sep 15, 2011
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This Opinion constitutes the findings of fact and
conclusions of law of the Court pursuant to Rule 7052 of theFederal Rules of Bankruptcy Procedure, which is made applicableto contested matters by Rule 9014 of the Federal Rules ofBankruptcy Procedure.
In re:)Chapter 11)WASHINGTON MUTUAL, INC., et al.,)Case No. 08-12229 (MFW))Debtors.)Jointly Administered
Before the Court is the request of Washington Mutual, Inc.(“WMI”) and WMI Investment Corp. (collectively the “Debtors”) forconfirmation of the Modified Sixth Amended Joint Plan ofAffiliated Debtors (the “Modified Plan”). For the reasons statedbelow, the Court will deny confirmation of the Modified Plan.I.BACKGROUNDWMI is a bank holding company that formerly owned WashingtonMutual Bank (“WMB”). WMB was the nation’s largest savings andloan association, having over 2,200 branches and holding $188.3billion in deposits. Beginning in 2007, revenues and earningsdecreased at WMB, causing WMI’s asset portfolio to decline invalue. By September 2008, in the midst of a global creditcrisis, the ratings agencies had significantly downgraded WMI’sand WMB’s credit ratings. A bank run ensued; over $16 billion in
See, e.g., Black Horse Capital LP, et al. v. JPMorgan
Chase Bank, N.A., Bankr. No. 08-12229, Adv. No. 10-51387 (Bankr.D. Del. July 6, 2010) (the “TPS Adversary”); Broadbill InvestmentCorp. v. Wash. Mut., Inc., Bankr. No. 08-12229, Adv. No. 10-50911(Bankr. D. Del. Apr. 12, 2010) (the “LTW Adversary”); Wash. Mut.,2deposits were withdrawn from WMB in a ten-day period beginningSeptember 15, 2008.On September 25, 2008, WMB’s primary regulator, the Officeof Thrift Supervision (the “OTS”), seized WMB and appointed theFederal Deposit Insurance Corporation (the “FDIC”) as receiver.The FDIC’s takeover of WMB marked the largest bank failure in thenation’s history. On the same day, the FDIC sold substantiallyall of WMB’s assets, including the stock of WMB’s subsidiary, WMBfsb, to JPMorgan Chase Bank, N.A. (“JPMC”) through a Purchase &Assumption Agreement (the “P&A Agreement”). Under the P&AAgreement, JPMC obtained substantially all of the assets of WMBfor $1.88 billion plus the assumption of more than $145 billionin deposit and other liabilities of WMB. The FDIC, as thereceiver of WMB, retained claims that WMB held against others.On September 26, 2008, the Debtors filed petitions underchapter 11 of the Bankruptcy Code. Early in the bankruptcy casedisputes arose among the Debtors, the FDIC, and JPMC regardingownership of certain assets and various claims that the partiesasserted against each other. Those disputes (and disputesbetween the Debtors and other claimants) were the subject oflitigation in this Court, as well as in the United States
Inc. v. JPMorgan Chase Bank, N.A., Bankr. No. 08-12229, Adv. No.09-50934 (Bankr. D. Del. Apr. 27, 2009); JPMorgan Chase Bank,N.A. v. Wash. Mut., Inc., Bankr. No. 08-12229, Adv. No. 09-50551(Bankr. D. Del. Mar. 24, 2009).Am. Nat. Ins. Co. v. JPMorgan Chase & Co., 705 F. Supp.
2d 17, 21 (D.D.C. 2010) (the “ANICO Litigation”); Wash. Mut.,Inc. v. F.D.I.C., No. 1:09-cv-00533 (D.D.C. January 7, 2010).Anchor Savings Bank FSB v. United States, No. 95-039C
(Fed. Cl. 1995) (hereinafter the “Anchor Litigation”); AmericanSavings Bank, F.A. v. United States, No. 92-872C (Fed. Cl. 1992)(hereinafter the “American Savings Litigation”).The Settlement Noteholders are Appaloosa Management, L.P.
(“Appaloosa”), Aurelius Capital Management LP (“Aurelius”),Centerbridge Partners, LP (“Centerbridge”), and Owl Creek AssetManagement, L.P. (“Owl Creek”), and several of their respectiveaffiliates.3District Court for the District of Columbia (the “DC Court”),
and in the Federal Court of Claims.
On March 12, 2010, the parties announced that they hadreached a global settlement agreement (the “GSA”). The GSAresolved issues among the Debtors, JPMC, the FDIC in itscorporate capacity and as receiver for WMB, certain largecreditors (the “Settlement Noteholders”), certain WMB Senior
Noteholders, and the Creditors’ Committee. The GSA wasincorporated into the Sixth Amended Plan which was originallyfiled on March 26, 2010, and modified on May 21 and October 6,2010.Hearings on confirmation of the Sixth Amended Plan, as wellas argument on summary judgment motions in the related LTW andTPS Adversaries, were held on December 1-3 and 6-7, 2010. The

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