Washington Mutual Piers shareholder group appeals plan confirmation

By Jim Witters

Wilmington, Del., March 13 - Eight Piers shareholders have appealed the confirmation of Washington Mutual, Inc.'s seventh amended joint plan of reorganization, according to documents filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

The Piers holders - George M. Dodson, Kaye R. Dodson, Mike Peters, Mark Evans, Michael Rozenfeld, Ganesan Jayaraman, Glenn Gardipee and Florin Matache - asked the court to reconsider the confirmation and provide them with relief.

As previously reported, Judge Mary F. Walrath confirmed the plan on Feb. 16.

Under the confirmed plan, holders of Piers claims will receive a share of the runoff notes remaining after distribution to senior noteholders, general unsecured creditors, senior subordinated noteholders and CCB-1 and CCB-2 guarantees claims. The Piers holders also will receive interest in the liquidating trust.

A hearing on the Piers' motion is scheduled for 10:30 a.m. ET on March 14.

Piers objections

The objection filed March 13 states:

• Piers holders who exercised their right to vote could not make an intelligent decision concerning the releases granted in the plan. The Piers holder had to grant releases and receive a possible distribution or opt out and receive none.

"The problem stems from the fact that at this time the distribution in question is unknown and will be unknown for an undetermined amount of time," because they are dependent upon the resolution of claims and the reserves tied to those claims, the court documents state.

"The reserves and unresolved claims are not small amounts, over $500 million and up to $800 million, amounts equal to many multiples of the estimated recovery for the Piers," documents state.

"As of now, a holder of Piers that did not submit a ballot has the advantage of waiting to have more precise knowledge of the distribution he/she is entitled to before making a decision on the releases," the documents state.

• Due to ambiguous language, the subordination agreement does not properly alert junior creditors to the various risks, and New York law governs the interpretation of Piers indentures.

New York law requires "explicitness" regarding the obligations one is agreeing to subordinate, the documents state.

The Piers holders assert that their subordination agreement fails to define the term "interest" and "does not provide that such subordination must be at the interest rate set forth in the senior instrument."

• The intent of the subordination agreement was to protect senior creditors from being denied interest, not to protect them "from not receiving the difference between the contract rate and the federal judgment rate."

• Piers holders are entitled to receive payment in full of principal and interest before any stockholders of Washington Mutual receive payments, estate assets were used improperly to settle disputes in mediation and Piers holders who are not part of the settlement groups are unfairly paying for the actions of other parties.

Washington Mutual, a Seattle-based savings and loan holding company, filed for bankruptcy on Sept. 26, 2008. Its Chapter 11 case number is 08-12229.

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