At approximately 10:15 this morning, Judge Walrath of the Delaware Bankruptcy Court made an oral ruling confirming Washington Mutual’s chapter 11 plan of reorganization.
Over the last three and one-half years, hundreds of attorneys and other professionals have worked thousands of hours in an effort to help WAMU obtain a measure of relief from its debts so that it could emerge from bankruptcy protection with the ability to continue to operate. What has emerged from the process is a smaller, leaner company with a greatly reduced debt load.
In its efforts to reach confirmation, WAMU reached agreements with every class of debtors, as well as the equity committee, providing that they would all vote to approve the plan. Because there was no dissenting class, the absolute priority rule (which provides that no class of creditors, or equity, can receive any distributions until all classes ahead of them are paid in full) was not implicated. This rule applies only when there is a dissenting class, so WAMU’s broad agreements neatly sidestepped this issue. This allowed WAMU to agree to provide current equity holders with approximately 95% of the equity of the new company. While it is not worth nearly as much as it was pre-bankruptcy, the fact that equity holders are receiving a distribution of this magnitude is almost unheard of in the modern bankruptcy era. Judge Walrath even referred to the substantial recovery equity holders would be receiving in her opinion, congratulating them on their efforts in the case.
It was a packed courtroom with chairs in the aisle and people standing near the door to be able to hear, but everyone involved in the case is happy to see an end to the intense litigation and a resolution that garnered an incredibly broad consensus.