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Bankruptcy Roundup: WaMu, Elpida

Effective Mar. 20, Washington Mutual officially completed the Chapter 11 bankruptcy restructuring process that spanned nearly three-and-a-half litigious years.

WaMu, which will emerge a much smaller company under the WMI Holdings moniker, confirmed that its bankruptcy plan approved on Feb. 23 indeed has gone effective. It is now planning to begin the payment of nearly $7 billion to creditors (or, in many cases, the hedge funds that bought up assets from creditors who went bankrupt or who were on their way to insolvency during WaMu's lengthy restructure).

It was the second largest corporate bankruptcy in U.S. history behind Lehman Brothers, which, coincidentally, went into bankruptcy protection mere weeks before WaMu in September 2008 and emerged from the legal process weeks before it this year.

The approved reorganization plan is viewed as somewhat of a small victory for lower-level creditors. Even though most will receive pennies on the dollar as a result of the expense of a drawn-out case, it was a shock to many market-watchers that lower level creditors were able to recoup anything. If nothing else, the cases may have illustrated the versatility and adaptability of the Chapter 11 system as the key take-away from the proceedings.

Meanwhile, weeks after garnering the dubious distinction of becoming the largest Japanese manufacturing bankruptcy in the nation's history, Elpida Memory, Inc. is looking to protect its assets from U.S.-based creditors.

Elpida filed this week in the Third Circuit of the U.S. Bankruptcy Court in Delaware seeking Chapter 15 bankruptcy protection. The lesser invoked chapter has been used to protect foreign-based companies with significant U.S. interests while going through a reorganization process in their country of origin. Elpida listed assets and debts in the U.S. at about $1 billion.

Elpida's initial filing in Japan—a rarity that could become more common amid Japanese economic malaise—included reported liabilities in the neighborhood of $5 billion, far too great to overcome without restructuring. The computer memory chip manufacturer, once a big part of a booming exporting industry dominated by Japan, has had trouble keeping up with foreign counterparts. The bulk of that competition, driven by lower costs, comes from outfits in South Korea. Also not helping Elpida is that its chips are not used for the growingly popular smart phones/devices like the iPhone/iPad and similar products. Additionally, the overvalued yen, which has become a bit of a magnet as investors leave the unstable euro, has made it harder for Japanese-based exporters to compete and threatens Japan's long-held trade strength.

Brian Shappell, NACM staff writer