EC should most likely come away from the table with the new reorg company, the preferreds and some cash. Some cash to pay preferreds the back interest they are owed, however the preferreds have very little value if JPM has the collateral. That has been a big problem every since we analyzed what the preferreds mean to the new company..
So to really take care of the preferreds, the EC will need to make them into commons, but give them enough cash to satisfy the outstanding debt/interest that is owed to them. Let the new company appreciate in value over the next 5 years, pay steady dividends to preferreds/commons and we may just get the votes needed to move into a conversion/confirmation process.
However, if we are to take on the preferreds into the new co, where does the compensation come from for "our" taking on this debt? Well the hold co already has the debt, but the mortgages are in JPMC's hands and as most of us know they were the top of the bunch that WAMU had, most likely very little "if any" defaults. Very valuable mortgages to JPMC, which they will not give us unless we pry them out of their greedy/dirty hands.
As for the SNH's they are most likely only going to settle for about 30-35% of the total disgorgement that could apply if and when EC convicts them in this courtroom of IT and THJMW lays down the fine. Most likely 1B in cash will come our way, the new co, a 10-1 split to get shares in order, a 130M disbursement of new shares to preferreds to make sure they are taken care of and we go do business of Mergers and Acquisitions on the outside.
That is my guess, so don't quote me on it. We retain the DC litigation against the corporate players which SG will gladly assume on a contingency. This is a good pre-trial settlement, if they want to go the distance, we will, but remember they have the right to appeal any final decision "Litigation Morass!"
Sometimes You Just Have to See the Light Thru the Trees !!!
