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

Q&A: Jeff Eaton Talks Capital Raising, CalPERS And The Secondaries Market

Oct 14 2014 | 10:16am ET

Global placement agent Eaton Partners has raised close to $60 billion for some of...

Lifestyle

MacDonald-Korth Offers Insights Into Paintings Bought, Sold By Hedgies

Oct 7 2014 | 9:00am ET

Definitive and complete ratings require an in-person examination of an artwork,...

Guest Contributor

PAAMCO: European Equity Exposure - Challenging Year, But All is Not Lost

Oct 16 2014 | 4:12am ET

European equity hedge fund managers have had a tough time so far this year. The...

 

Videos

Editor's Note

    Must Attend Hedge Fund Charity Events For October

    Sep 30 2014 | 9:29am ET

    The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.