A group of senior bondholders in the Washington Mutual Inc Chapter 11 bankruptcy has vowed to battle on against the proposed global settlement Washington Mutual reached with the FDIC. The proposed settlement which was submitted in Washington Mutual's revised Chapter 11 bankruptcy plan, calls for the return of $7 billion to creditors and a resolution of claims involving FDIC and JP Morgan.
William Isaacson, a partner at the law firm Boies, Schiller & Flexner LLP representing the banking unit's senior bondholders, in a statement called the proposed settlement "an enormous loss" to the bankruptcy estate, creating a "windfall" for the holding company and JPMorgan through the awarding of billions of dollars of tax refunds.
He also said it was unfair that noteholders of the holding company would be paid in full, while senior noteholders at the bank unit level would "not receive anything close" to full payment.
"Our clients do not support this proposed settlement," he said. "They will seek to vindicate their rights and claims, including their claims in the Washington Mutual Inc bankruptcy proceedings, until a decision on the merits is reached."
If senior bondholders are able to convince the bankruptcy judge that Washington Mutual is unfairly favoring one group of creditors over another, the embattled Washington Mutual may be forced to return to the drawing board and create yet another revised Chapter 11 bankruptcy plan. However, there is no clear indication that they bankruptcy judge will side with the senior bondholders. If the bankruptcy judge approves the settlement plan in Washington Mutual Chapter 11 bankruptcy, senior bondholders could be left with significant losses and with no recourse against the bankrupt bank.