Just a little Research and all IMHO
Let me expand on the “Initial Payment = Bid Amount”
I think this is a very important point because this is the starting point.
Here the FDIC owned 100% of WMB plus the assets they took from the Holding Company… and JPMC owned 0%
In the PURCHASE AND ASSUMPTION AGREEMENT (link at bottom)
From Page 20 Article VII - The Assuming Bank has submitted to the Receiver a positive bid of $1,888,000,000.00 for the Assets purchased and Liabilities Assumed hereunder (the "Bid Amount").
From Page 7 - "Required Payment" means $50,000,000.00.
From Page 5 - "Initial Payment" means the payment made pursuant to Article VII, the amount of which shall be either (i) if the Bid Amount is positive, the Bid Amount plus the Required Payment
Initial Payment = Bid Amount + Required Payment
$1,938,000,000.00 = $1,888,000,000.00 + $50,000,000.00
The Initial Payment of $1.9Billion is part of the Full Price with the Balance to be paid at a later time.
What’s the Full Price?
We know this is a - WHOLE BANK PURCHASE AND ASSUMPTION AGREEMENT
Which means JPMC wants everything except the debt. Also this would include the Assets taken from the Holding Company WMI… JPMC chose “WHOLE BANK PURCHASE”
From page 1 - WHEREAS, the Assuming Bank desires to purchase substantially all of the assets and assume all deposit and substantially all other liabilities of the Failed Bank on the terms and conditions set fort in this Agreement;
From the Top of Page 3 - "Book Value" means, with respect to any Asset and any Liability Assumed, the dollar amount thereof stated on the Accounting Records of the Failed Bank…
So the term “Book Value” represents the Dollar amount of a particular Asset or Assumed Liabilities
IMHO We can say that the Full Price is the Book Value of the Assets purchased plus the Book Value of the Liabilities assumed.
(It’s a easier read if you only read the words in bold)
From Page 9 - 3.2 Asset Purchase Price.
(a) All Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Bank shall be purchased for the amount, or the amount resulting from the method specified for determining the amount, as specified on Schedule 3.2, except as otherwise may be provided herein. Any Asset, asset of the Failed Bank subject to an option to purchase or other asset purchased for which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. Loans or other assets charged off the Accounting Records of the Failed Bank prior to the date of Bank Closing shall be purchased at a price of zero.
ARTICLE II - ASSUMPTION OF LIABILITIES
From Page 8 - 2.1 Liabilities Assumed by Assuming Bank. Subject to Sections 2.5 and 4.8, the Assuming Bank expressly assumes at Book Value (subject to adjustment pursuant to Article VII) and agrees to pay, perform, and discharge, all of the liabilities of the Failed Bank which are reflected on the Books and Records of the Failed Bank as of Bank Closing, including the Assumed Deposits and all liabilities associated with any and all employee benefit plans, except as listed on the attached Schedule 2.1, and as otherwise provided in this Agreement (such liabilities referred to as "Liabilities Assumed"). Notwithstanding Section 4.8, the Assuming Bank specifically assumes all mortgage servicing rights and obligations of the Failed Bank.
With Book Value in mind -
We can see that if there are 1Billion Dollars in Assets… they would have to be Purchased for 1Billion Dollars…and if there are 1Billion Dollars in Assumed Liabilities… they would have to be Purchased for 1Billion Dollars…
In the AMENDED MEMORANDUM OPINION - (AMO) (link at Bottom)
From Page 48 - JPMC knew it would acquire WaMu’s RMBS liabilities
From Page 2 - JPMC does not dispute that it assumed a certain amount of WaMu’s mortgage repurchase liabilities, but argues that it only assumed such obligations up to their “Book Value”
From Page 5 - Defendant WMMSC, now a subsidiary of JPMC, serves as the seller and depositor for 44 of the 99 Primary Trusts.
From Page 48 - and JPMC assumed liabilities under the P&A Agreement of roughly $300 billion.
From Businessinsider.com - They found something unexpectedly good (meaning JPMC): about $30 billion of mortgages on apartment buildings, which earned strong returns whether the economy was performing well or not.
AII on the terms and conditions set fort in this Agreement;
The Real Question is - what is the BOOK VALUE FOR EVERYTHING?
And as a side note -
From (AMO) page 7 - “In its role as receiver for a failed depository institution, the [FDIC-R] has a statutory obligation generally to maximize the return on the sale or disposition of the receivership estate’s assets. The receiver distributes any funds realized from its liquidation efforts to the failed institution’s creditors and shareholders in accordance with the FDIC’s priority scheme.”
PURCHASE AND ASSUMPTION AGREEMENT
AMENDED MEMORANDUM OPINION
Just my opinion, research and curiosity…
Not intended to serve as a basis for investment in any security of any issuer. GLTA