Washington Mutual to scrap proposed bankruptcy reorganization plan, will move forward with existing plan after negotiations with shareholders break down

Michelle Rivera

DENVER , June 16, 2011 (Associated Press) – Washington Mutual Inc. will scrap a proposed bankruptcy reorganization plan after negotiations to resolve shareholders' objections failed.

An attorney for Washington Mutual confirmed Thursday that talks had broken down, and that the company will move forward with its existing plan. A Delaware judge last week granted Washington Mutual more time to reach an agreement with shareholders.

Washington Mutual filed for Chapter 11 bankruptcy protection in 2008 after the federal government seized its flagship bank and sold its assets to JPMorgan Chase for $1.9 billion.

The company's committee of equity security holders was concerned that, under the proposed plan, too much of the value of the entity emerging from bankruptcy was being claimed by holders of preferred stock, at the expense of holders of common stock.

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