Under the reorganization proposal filed late Friday by the bankrupt shell of Washington Mutual, shareholders get nothing — no money, and not even a chance to vote on the plan.

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Under the reorganization proposal filed late Friday by the bankrupt shell of Washington Mutual, shareholders get nothing — no money, and not even a chance to vote on the plan.

Instead, the holders of 1.7 billion shares of Washington Mutual Inc. (WMI) would be formally wiped out.

Certain classes of creditors would vote on approving the plan, but it’s assumed that owners of WaMu common stock would reject the proposal, so their votes won’t be tallied.

The company will distribute more than $7 billion in assets as it liquidates, but it expects that money to be exhausted long before reaching common shareholders. Under federal bankruptcy law, common shareholders are the last to be paid when a company reorganizes or liquidates.

The plan is certain to spark fresh outrage among WaMu shareholders who’d hoped to get something out of the bankruptcy.

Many have banded together online to press their claims that JPMorgan paid too little for WaMu’s banking operations after they were seized by regulators in September 2008.

The proposed plan hinges on a “global settlement” of a tangle of litigation among WMI, the Federal Deposit Insurance Corp. (FDIC), JPMorgan Chase and certain creditor groups.

When regulators seized Washington Mutual Bank from its parent, the FDIC immediately sold the bank’s operations to JPMorgan for $1.9 billion.

In the wake of the seizure, the different parties began squabbling over ownership of various assets, including $4 billion in funds that had been on deposit with Washington Mutual Bank. Two weeks ago WMI announced a settlement in which it would get more than $6 billion, including those disputed deposits and a share of the bank’s expected tax refunds.

In a statement Friday, WMI conceded that while JPMorgan and the creditor groups had signed off on the settlement and the Chapter 11 plan, the FDIC “has not agreed to all of the provisions contained in the draft settlement agreement. However, discussions are ongoing among the parties and they are hopeful that such agreement will be obtained in the near future.”

Under the plan, a few classes of creditors with priority under the bankruptcy laws would be paid in full. JPMorgan would assume full responsibility for claims under various benefit plans, including WaMu’s pension and medical plans.

But the bulk of creditors, including the holders of $4.1 billion in senior notes and $1.67 billion in senior subordinated notes, would receive only a prorated portion of their claims. The precise haircuts those noteholders would take weren’t disclosed in the draft plan filed Friday night.

Other creditors, including holders of $750 million in junior subordinated debt and 3 million shares of WMI preferred stock, would receive prorated payouts only if all the senior creditors’ claims were paid in full.

Certain classes of creditors would receive the right to buy new stock in a reorganized WMI. That entity would not be a bank, but would hold equity interests in Washington Mutual Inc. investment and mortgage-reinsurance subsidiaries that weren’t seized by regulators.

WMI requested the U.S. Bankruptcy Court in Delaware schedule a May 19 hearing on the plan. The plan says WMI’s liquidation could be completed by July.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com