After Washington Mutual Bank became the biggest failure of any savings and loan in U.S. history, its bankruptcy proceedings languished for over three years, complicated by insider claims against the hedge funds that allegedly traded in the bank’s debt while trying to negotiate a reorganization. Just last month, the court considered the debtors’ sixth amended plan, which essentially cancelled all existing stock, leaving the common and preferred shareholders with nothing, while issuing stock in a reorganized entity to the most senior creditors and equity investors. Not surprisingly, the “out” creditors objected to the plan, claiming it substantially undervalued the stock and overpaid the equity stakeholders. We’ll have a full write-up of In re Washington Mutual, Inc., 2011 WL 4090757 (Bkrtcy.D.Del.)(Sept 13, 2011) in the next (November) Business Valuation Update; the courts’ opinion will be posted soon at BVLaw,
In the meantime, business appraisers and insolvency analysts may want to take a look at the 61-page report by the debtors’ expert, posted recently on the “Ghost of WaMu.” Started in 2009 by a former WaMu shareholder who was “burned” by the FDIC’s seizure of the bank’s billion-dollar assets, the site has served as a central repository for the latest filings. “I was pleasantly surprised how well the website did the job,” says the founder (identified only as “Ghost”), who also reports that the expert for the plan objectors provided courtroom testimony only, to rebut the debtors’ report. In fact, the court ultimately credited much of his critique—including the derivation of the WACC by the debtors’ expert and his decision to give little weight to the comparable transactions analysis, which makes the “ghost” posting a solid resource, indeed.
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