For the second time, bank holding company Washington Mutual was refused a confirmation of their reorganization efforts by bankruptcy judge Mary Walrath in Delaware without first engaging in mediation with various creditor groups. Judge Walrath brought up several reasons for her decision that included claims by a committee of equity security holders that hedge funds supporting the plan had engaged in insider trading of WMI debt based on information they obtained during the bankruptcy.
As such, Judge Walrath ordered the various warring parties to resolve their differences through a mediator without letting the three year old bankruptcy case degenerate into a “litigation morass.” The parties concerned are several creditor groups (including the committee of equity security holders), the hedge funds and Washington Mutual’s committee of unsecured creditors.
In response, Washington Mutual filed a court filing this week in which it gave its assurance it would make several modifications such as the interest rate to be paid to creditors.
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