WaMu Deal Collapses, Hedge Funds Back On Hot Seat

Jun 17 2011 | 3:54am ET

Insider-trading allegations against four hedge funds stemming from the Washington Mutual bankruptcy are back on after a deal struck last month collapsed.

WaMu's common shareholders have backed out of the proposed deal, fearing that the proceeds would end up exclusively with preferred shareholders—among them, the four hedge funds, Appaloosa Management, Aurelius Capital Management, Centerbridge Capital Partners and Owl Creek Asset Management, currently among WaMu's largest creditors. What's more, the insider-trading allegations that the shareholders agreed to drop last month are back on; the group on Wednesday filed notice in Delaware bankruptcy court that they plan to move forward with depositions from the hedge funds that were shelved when the deal was reached last week.

That deal fell apart when the preferred shareholders, led by Black Horse Capital, Guggenheim Partners, Paige Opportunity Partners, Pandora Select Partners and Scoggin Capital Management, announced their opposition to giving common shareholders a stake in the only business set to survive the WaMu reorganization, a reinsurance company. Under the proposal, the creditor hedge funds would have accepted $160 million in debt and preferred stock in the reorganized company while lending it up to $100 million. WaMu shareholders were to get common stock in that company and a litigation trust.

WaMu, which collapsed in 2008, was sold to JPMorgan Chase. The creditor hedge funds initially backed the bank's Chapter 11 plan but refused to renew their support earlier this year. Some shareholders had alleged that the hedge funds used confidential information acquired during the crafting of WaMu's reorganization plan.


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR