UPDATE 1-US FDIC, WaMu reach agreement on bankruptcy plan

* FDIC, WaMu, JPMorgan reach deal on WaMu bankruptcy

* Will distribute about $7 bln to creditors

* Could bring 18 months of legal fights to a close
(Adds Washington Mutual statement, details of settlement)

By Karey Wutkowski

WASHINGTON, May 22 (BestGrowthStock) – Washington Mutual Inc
(WAMUQ.PK: ) and the Federal Deposit Insurance Corp have reached
a global settlement that will return $7 billion to the bank’s
creditors, a critical step in the bankruptcy involving the
biggest bank failure in U.S. history.

The FDIC said on Friday the agreement settles claims
between the bankrupt bank’s holding company and JPMorgan Chase
(JPM.N: ), which acquired the failed bank.

The FDIC is involved because it was appointed receiver of
Washington Mutual in September 2008, during the height of the
financial crisis. The deal comes after the FDIC board had
rejected a previous proposed settlement.

The bank holding company has been seeking a way out of 18
months of legal fights so it can begin repaying creditors.

The three parties have been fighting over deposits
Washington Mutual had at its seized bank and over billions of
dollars in tax refunds.

“This agreement will result in substantial recoveries to
the receiver and resolve potential claims that could have taken
years and millions of dollars to litigate,” FDIC General
Counsel Michael Bradfield said in a statement.

Washington Mutual said in a statement later on Friday that
settlement was filed with the full support of the FDIC,
JPMorgan, and the official committee of unsecured creditors.

“WMI has worked diligently over the last 20 months to
maximise the value of the bankruptcy estate and is confident
that the amended plan will accomplish the objective of
providing substantial recoveries for WMI’s creditors,”
Washington Mutual said.

The settlement is subject to the approval of the U.S.
Bankruptcy Court for the District of Delaware. The court will
hold a hearing on June 3 to consider approval, and Washington
Mutual will ask the court to confirm the plan by July 20.

Under the settlement, Washington Mutual will establish a
liquidating trust that will distribute about $7 billion to
creditors, including about $4 billion of previously disputed
funds on deposit with JPMorgan.

That $7 billion includes about $2.6 billion that will come
from tax refunds. JPMorgan is expected to get about $2.4
billion in tax refunds under the settlement.

Washington Mutual said the various litigations involving
it, JPMorgan, and the FDIC will be stayed or dismissed.

JPMorgan will assume certain liabilities related to benefit
plans.

The settlement could clear the way for Washington Mutual to
reorganise as a mortgage insurer and investment company with
valuable tax breaks.

The company plans to sell shares to fund its exit from
bankruptcy and reorganisation.

The case is In re Washington Mutual Inc, U.S. Bankruptcy
Court, District of Delaware (Wilmington), No. 08-12229.

Stock Market Report

(Reporting by Karey Wutkowski; Editing by Jerry Norton)

UPDATE 1-US FDIC, WaMu reach agreement on bankruptcy plan