Good one by the EC, my take is in ( )
In fact, much of the expense and delay complained of in the Debtors’ Statement is of the
Debtors’ own making, traceable to the Debtors’ willful refusal to accommodate – or even to
acknowledge – the interests of many of its constituents.
Obviously, there can be no assurance that mediation will be completely or even partially
successful, but the Equity Committee submits the cost of finding out will be well spent.
The Debtors rely on an overstated burn rate to justify skipping mediation of
the entire plan. The $30 million per month figure cited by the Debtors is apparently derived
from the accrual of post-petition claims at the contract rate. At the federal judgment rate, the
interest accrued monthly is only approximately $11.4 million. Fees and expenses will be
incurred in some amount in addition to this, but those fees would undoubtedly be much greater if
teams of lawyers must gear-up for another contested confirmation hearing than they would for
mediation. (Crooks)
There are also potential benefits to the estate from some delay, which are
ignored by the Debtors. The billions in assets now held by the estate are earning interest,
presumably, in an amount that should offset at least some of the interest expense. More
significantly, postponing emergence until after January 1st will increase the size of the usable tax
NOL held by the reorganized debtor by several billion dollars. Indeed, the increase in value of
this NOL between a confirmation and emergence in December and one in January is so
significant that at this point confirmation should be postponed until the new year regardless of
any mediation.
Mr. Kosturos would then be vested with the
authority to settle the very claims against the Settlement Note Holders these estates objected to
being brought in the first instance. As the Liquidating Trust Agreement is now drafted, he would
have authority to settle such claims without seeking this Court’s approval, (Yeah and We know Special K is going to cover everyones arse in this mess.)
If the Debtors intend that the Equity Committee will control the ongoing
Settlement Note Holder litigation, the plan must be modified accordingly. 3 And provisions must
be made for funding the case and determining settlement authority. None of these issues are
addressed in the Debtors’ proposal. Of course, the Debtors could have raised and discussed such
issues with the Equity Committee before filing their Statement yesterday. As has been typical of
the Debtors’ high-handed and hostile treatment of equity, they made no effort to do so. (That’s because they are trying to get as far away from this IT things as they can!)
Further, although the Plan authorizes the Liquidating Trustee to seek estimation of
Disputed Claims (Plan § 27.2), Mr. Kosturos is not the proper individual to pursue estimation of
the Settlement Note Holders’ claims for the same reasons that he should not have prosecution
and settlement authority over those same claims. (Fox guarding the henhouse)
Mr. Kosturos’ demonstrated animosity toward maximizing the value of the NOLs
renders him unsuitable to exercise the rights attendant to the Reorganized Common Stock while
those assets are held in reserve. And aside from that clearly unacceptable mechanism, there is no
other means by which to preserve the value of the NOLs, which equity holders believe can be
exploited but that the creditors have insisted they will disregard. (has to do with that little A vs L thing)
The
draft WMI Liquidating Trust Agreement attached to the Statement, however, suggests that the
Liquidating Trustee shall have the authority to settle, dispose or abandon any cause of action,
claim or litigation with a value in excess of $500,000 with only Trust Advisory Board approval
and without Bankruptcy Court approval. (Of course it does, who woulda thunk it)
Mr. Kosturos should not have any authority with respect to the estates’ potential
claims and causes of action against the Debtors’ former Officers and Directors – the same claims
that the Debtors have ignored for over two years and then attempted to sweep under the rug by
entering into tolling agreements in the middle of the July confirmation hearing. The Debtors
conduct to date amply demonstrates a willingness to sacrifice estate value to further the interests
of management and board members and thus the Debtors’ current representatives, including Mr.
Kosturos, cannot be relied upon to pursue these claims for the benefit of the Debtors creditors
and equity holders. (I remember discussing the tolling agreements back then)
The Equity Committee believes that after accounting for the modifications
to the Plan imposed by the Court’s September Opinion, the shortfall at the PIERS Class is less
than $50 million. (AND THE GAP DECREASES!)
Furthermore, the Liquidating Trustee
should be chosen by the Trust Advisory Board, not by the Debtors’ management (Mr. Kosturos)
who, not surprisingly, has chosen himself. (Nice punch in Special K’s gut Parker!)
Furthermore, the Liquidating Trustee
should be chosen by the Trust Advisory Board, not by the Debtors’ management (Mr. Kosturos)
who, not surprisingly, has chosen himself. (Bull Shiat Rosie!)
Sometimes You Just Have to See the Light Thru the Trees !!!
