Impac Mortgage Holdings Inc (IMPM)

[kyeh]

It has everything to do with the class of treatment of the 2 classes of Preferreds. Read the Legal Memorandum on the Maryland District Court website:

http://www.courts.state.md.us/businesstech/pdfs/mdbt1-13.pdf

Excerpt from the above legal document from official Maryland Court website:

DEFENDANT:

Defendants argue that plain language of the Articles Supplementary defeats Plaintiff?s claim. According to Defendants, the number and percentage of consenting Preferred B shares alone is irrelevant because the Articles Supplementary allow (and in fact, require) voting of
Preferred B and C shares together as a class. Under this interpretation of the Articles Supplementary, the only vote tally that matters is the total percentage of all Preferred Shares that were tendered and consented, and failure to obtain consents from holders of two-thirds of the Preferred B shares alone does not prevent a valid amendment of the Articles.

PLAINTIFF RESPONSE:

First, Plaintiff asserts that the Preferred B and C shares do not have “like voting rights” in this transaction. He argues that Preferred C shares cannot have like voting rights as Preferred B shares because they have no voting rights with regard to Preferred B shares.

...

Plaintiff?s argument would conclude that Preferred C shares would never have the ability to participate in a class vote on amendments to the Preferred B Articles Supplementary.

...

and so on...

To summarize, Timm's argument is that a vote on Preferred C's articles should have no bearing on Preferred B's articles because they are not the same.

[loobeyondbm]

Both of you and Joe are confused on the major point of lawsuit: the lawsuit tries to invalidate the tender/vote event, and has nothing to do the different treatment of 2 classes and Timm even doesn't ask for any different treatment/result. The judge will not reward you anything that you didn't ask.

I am not trying to convince you or Joe, do whatever you think is right...

[kyeh]

5. Concerning lawsuit, the court order is pretty clear on claim 1, that in order to make the proxy stand, 2/3 of each class much vote for change. Thus the judgement is for both classes of preferreds, if IMPHP wins, IMPHO also wins. IMPHP getting paid while IMPHO getting nothing is absolutely nonsense.

Actually, you make an interesting point. If you truly believe this to be the case, then it's very likely that both IMPHO and IMPHP will lose this lawsuit. Why? Because the combined vote of IMPHO and IMPHP shareholders DID in fact breach the 66.6% threshold. So if you believe IMPHP and IMPHO should be treated the same and should be categorized together -- then the votes for both classes should count as one vote and the 66.6% requirement is met making the amendments valid.

However, per Curtis Timms' argument vs. IMPAC MORTGAGE -- he's basically saying IMPHO and IMPHP are two completely different entities and should not be grouped together as one entity -- i.e. their votes, their terms, their dividend payouts, their articles, etc. are in fact, different. So while the 66.6% threshold was exceeded in the case of IMPHO shareholders, they were not reached by IMPHP shareholders.

So if you truly believe both classes of preferreds should be have the same treatment and the judge agrees, then it's likely Curtis Timms will lose his case. On the other hand, if you believe IMPHP and IMPHO should receive different treatment because they are different entities -- then Timms could win his argument and IMPHP shareholders would certainly benefit. However, in the scenario above -- since it was decided that the 2 preferreds are DIFFERENT...it's up to the judge to interpret how that applies to IMPHO so the same ruling would not necessarily apply to IMPHO (NOTE: IMPHO did receive > 66.6% of the YES vote meeting the threshold). Again, this is all speculation and it's really up to the judge.

DISCLAIMER: I am NOT a lawyer and this is just one shareholder's opinion of the case. I am also long IMPHO, IMPHP and IMH stock.

[kyeh]

IMPHO vs IMPHP differences

- Judges are human and the ultimate ruling can be quite unpredictable. What may seem logical to you may not seem be logical to the judge who's opinion is the only one that counts -- not yours. The judge could very well rule in favor of IMPHP and say that same ruling does not apply to IMPHO. There's a variable premium to that possibility which is reflected in the price of the two preferreds.

- The preferred shares pay differently. 9.125% vs 9.375%. A small 0.25% difference but a difference nonetheless. This also applies to the potential for retroactive dividends in case the ruling favors both IMPHP and IMPHO. IMPHP sharedholders will get more $$$.

Disclosure: I am long shares of both IMPHO and IMPHP as well as the common stock.

[dpsimswm]

It is a journey. In a few weeks, I am going to be going dark on the message boards. I will be filing to be a RIA.

[camaro4me]

IMO they not only have various options to restructure the balance sheet, but it is also to the benefit of Impac to do so.

[robigus]

I sure am glad that I listened to you, David. I just wish I had the money to buy more when it was at $2.

[dpsimswm]

Interesting point.

I think the return to profitability opens a lot of doors for the company to restructure items on the balance sheet.

[Nellafom]

with interest rates on savings so low, what would you pay for a stock that pays $2.50 per share per year? How much more than $25 pps is it worth? At $50 pps it is still a 4.5% return.

[dpsimswm]

I think we are a few quarters away from any dividend. The company said they needed $50 million in working capital.

I'm ready to help them raise that money.

[dpsimswm]

Why would anyone sell a stock for $9 when it will be worth $25 in a year?

Great day to be a shareholder of Impac.

[camaro4me]

imo preferreds will lag commons but will do better.

[loobeyondbm]

Arguing on IMPHP/IMPHO is meaningless. The outcome is based on how well the company does. If IMH goes up to $30, $40, then it's no brainer that the company does some stock offering to redeem the preferreds.

[Joe Stocks]

Dang! Why don't I own any common!

Holey moley! Look at the ask on IMPHP now at 15.00! Few sellers on both issues.

[Joe Stocks]

2. IMPHP/IMPHO ratio used to be 2, now it's 1.15.

Good point. Right now the ask on IMPHO is higher. You can sell IMPHO here at 7.50 and buy IMPHP for 8.25. That 75 cents gives you a better seat at the table IMO.

[loobeyondbm]

1. Market could be very stupid - it's obvious during our journey with Fannie/Freddie common/preferred stocks. For example, FNMA was $0.3 when FNMAS traded close to $3.

2. IMPHP/IMPHO ratio used to be 2, now it's 1.15.

[Joe Stocks]

Perhaps. Still up in the air how the court will rule. I have no problem accepting paying a premium for the IMPHP shares as I think their case that the required majority did not accept the change of terms in their shares, whereas the IMPHO holders did.

[camaro4me]

If you bought imphp instead of impho, you paid too much for your shares.

[Joe Stocks]

We'll obviously with IMPHP shares selling at a premium to the IMPHO shares the market thinks that I may have a case. The market could be wrong, but I like the confirmation indicated by the PPS difference.

[loobeyondbm]

I read the order and my conclusion is that you are absolutely wrong. I bet with my money and you bet with yours. That's it.

[Joe Stocks]

loobeyondbm, You are most absolutely wrong. I don't think you are familiar with the current standing of the lawsuit. I doubt that I am myself. But, we do have this one opinion from the court.

From; http://www.courts.state.md.us/businesstech/pdfs/mdbt1-13.pdf

The Articles Supplementary allow material, adverse amendments only upon approval by two-thirds of the affected shares, and Plaintiff argues that Defendants simply did not have enough Preferred B votes to amend the Articles for the Preferred B shares.7 The parties agree that, while holders of all Preferred Stock tendered an aggregate of approximately 67.7% (4,378,880 shares) of the outstanding shares in response to the tender offer8, the breakdown of the tendered shares reveals that Preferred B holders tendered only 66.2% (1,323,844 of 2,000,000) of the outstanding Preferred B shares.9 Plaintiff asserts, and Defendants acknowledge, that the number of tendered Preferred B shares alone fell short of the requisite 66.67% of outstanding shares necessary to accomplish a materially adverse amendment to the Articles Supplementary.

Start reading on page 8 about counts I and II. Count one is all about IMPHP not having enough votes, while IMPHO did have the votes necessary to change the terms of the preferreds terms. The whole argument is that IMPHP did have enough votes and and should not be held to the vote by the IMPHO holders. It says nothing to that if the IMPHP shareholders did not approve by the 67% vote, that the IMPHO vote is then invalid.

You say the lawsuit is to reverse the event. At one point that was true. But the courts have ruled on several of the accounts that would affect that for the IMPHO shareholders leaving the IMPHO shareholders in a weaker position.

[loobeyondbm]

You are absolutely wrong.

The lawsuit is to reverse that event - so both preferreds stand the same result. There's no distinguish between B and C preferreds. Timm is suing on behalf of both B and C preferred owners. So it's nonsense that people argue B would do better than C with favorable lawsuit result.

The argument is whether the tender offer and contract change stand. There's no 2 separate votes by each preferred, the company even urged owner to vote together if owned both B and C preferreds. It's so clear that I don't bother to argue further on this issue.

The investment in preferreds is ultimately a bet on the success of the company.

[Joe Stocks]

5. Concerning lawsuit, the court order is pretty clear on claim 1, that in order to make the proxy stand, 2/3 of each class much vote for change. Thus the judgement is for both classes of preferreds, if IMPHP wins, IMPHO also wins. IMPHP getting paid while IMPHO getting nothing is absolutely nonsense.

IMPHP and IMPHO are two separate securities. Shareholders for both voted on the tender offer. IMPHO shareholders tendered the required numbers of shares needed to change the terms of their security.

IMPHP shareholders did not.

The company argues that it should be the total vote of the two combined which should rule. The lawsuit says the vote should be separate for each security and the IMPHP holders should not be held to terms approved by the IMPHO holders.

You say they should be treated the same. I disagree. I think the IMPHP shareholders have a very good argument and may win their lawsuit. From my understanding from what Dave Sims has written, the IMPHO holders are not a party to the lawsuit. I think the court ruled gaisnt them if they were at one point. The main sticking point is the vote. Should the combined vote stand, and both IMPHO and IMPHP lose. Or, are the securities treated as separate with each shareholder of each entitled to their own vote. If so, IMPHP holders win. IMPHO loses. (Not really loses as they aren't a party.) If IMPHP wins all the original terms of the securities should be reinstated. IMPHO shareholders status doesn't change.

[loobeyondbm]

My view

1. I just spent several hours reading the two 2009 proxies and court 2013 findings/orders, so my thinking is fresh but could be shallow.

2. Preferred stock enjoys the same residual earnings as common stock does, the difference is that the preferred contract dictates some special or preferred treatments. The board has both contractual and fiduciary duties to preferred owners. If company declares dividend to common stock, IMPHO holders entitle dividend with prefixed dividend interest. The view that common could get dividend but preferred gets nothing is obviously false.

3. Thus even assume 2009 event stands, IMPHO enjoys equal economic interest in the company as the common shares. It's thus strange that common trades 3 times higher than preferred.

4. Certainly if company (management and board) definitely desires to screw preferred owners, they can postpone dividend for a long time so even one day IMH gets to $1000, the company can still redeem IMPHO at $25. This probably explains why preferreds trade at significant discount to commons.

5. Concerning lawsuit, the court order is pretty clear on claim 1, that in order to make the proxy stand, 2/3 of each class much vote for change. Thus the judgement is for both classes of preferreds, if IMPHP wins, IMPHO also wins. IMPHP getting paid while IMPHO getting nothing is absolutely nonsense.

6. Most likely outcome is the company redeems outstanding preferred shares and most owners would be happy to get $25. The lawsuit puts more risk to the firm as if the firm loses, it has to pay accumulated dividends (a lot) and yield out board seats. The company just didn't have resources to do so but in the future as it makes progress, redemption of preferred is the right way to go.

[Nellafom]

Hmmm at $3 plus in earning, I think the common holder are expecting a dividend payment ... but hold on there is one little problem :)

IRVINE, Calif., March 31 /PRNewswire-FirstCall/ -- Impac Mortgage Holdings,
Inc. (Pink Sheets: IMPM), or the "Company," a Maryland corporation, announces that the Board of Directors will not be declaring, and the Company will not be paying, dividends indefinitely on the Company's 9.375% Series B Cumulative
Redeemable Preferred Stock (Pink Sheets: IMPHP) and 9.125% Series C Cumulative Redeemable Preferred Stock (Pink Sheets: IMPHO). Although the Company will not be making dividend payments, unpaid dividends on the preferred stock will accumulate.

Until such time as all cumulative dividends on the preferred stock
are paid, the Company may not pay dividends on, nor redeem, repurchase or make any distribution on, shares of its common stock.

If the Company does not pay
dividends on its preferred stock for six or more quarterly periods (whether or
not consecutive), preferred stockholders will be entitled to elect two
additional directors to the Company's Board of Directors to serve until all
dividends are paid.

[dpsimswm]

Nice to see all the 52 week highs this stock is breaking. Common and preferred.

$IMH $IMPHO

I guess that's what happens with you quadruple sales volume and report that you are getting ready to recognize your DTA!

[dpsimswm]

Technically, the earnings release is not late, but it is later than last year. Any ideas why?

[dpsimswm]

Someone has just bought about $10k worth here. Anyone want to take credit?

I moved my bid up to $4.70.

[dpsimswm]

I have moved my bid up to 4.45.

I will continue to add to it there.

[Joe Stocks]

>>"Liquidation rights give preferred stockholders the book value of the company." <<

If that is the case, how are those rights exercised? That doesn't make sense.

The point I made earlier "worth 4.30, but not 4.45?"...
Dave, what I was getting at is that you talked about IMPHO being like a zero coupon bond. If you bought 100 shares you would spend $430. At 4.45 per share it would be $445., or just $15 difference. If one were looking as your theory goes at an eventual payout of $25 per share, or $2500 for 100 shares, the $15 difference on the $2055 gain ($2500 -$445= $2055) seems miniscule.

Obviously with issues like IMPHO and IMPHP on the pink sheets, pricing could be volatile with wide price swings. If one has conviction in the trade, and accepts the volatility, why not take the shares at the ask for just 15 cents more than the bid?

Another point. The way I look at it, between IMPHO and IMPHP there is probably only about 2 mil shares outstanding after the tender offer. Of those, probably only 680,000 are IMPHP shares. If IMH was courted ordered to pay back dividends on the IMPHP shares alone it would be $9.52mil. I would think IMH would have a good amount of incentive to settle with the IMPHP holders. I don't see the incentive with the IMPHO shareholders.

I would ask those that are buying IMPHO if they were a juror/judge, and saw that the required number of shareholders voted to accept the tender offer and terms that would be forced on all, why would you not rule in favor of the company?

Get in mind the IMPHO shareholders voted to approve;

-- make future dividends, if any, non-cumulative;

-- eliminate the restrictions on paying stock dividends on(they are talking about the common here), or
repurchasing, stock until preferred stock dividends are paid;

-- eliminate the right of preferred stockholders to elect two directors if the Company does not pay dividends for six or more quarters;

-- eliminate preferred stockholders' right to approve senior preferredstock; and

-- eliminate the prohibition of redeeming less than all shares of preferred stock if preferred dividends are not paid.

[jwnoble3]

"Liquidation rights give preferred stockholders the book value of the company."

Excellent point DS.

[jwnoble3]

Applying IHUB ignore functionality to you now (again, not quite sure why it was not working).

[Joe Stocks]

Worth 4.30, but not 4.45?

[dpsimswm]

I am walking my bid up to $4.30 and placing additional shares there.

[dpsimswm]

You DON'T OWN IMPHO and that is a fact. You just stated it.

[camaro4me]

If you only own IMPHP stocks you should post on that board, not the impho board. BTW Joe, you would do well to listen to dp and jw, they both know what they are doing. You will not get anywhere by trying to antagonize them into a fight.

[Joe Stocks]

Dave, Speaking of half truths, there is only one board I post on where I don't own the stock. That is the Lehman board. I OWN FnF preferreds and I own some IMPHP. Trolling? Those are the only three board I post on.

Again, speaking of half truths, my thinking and what I have posted is directly aligned with what keyh has posted. I posted terms to the tender offer. You seem to want to ignore those and how the vote affects IMPHO. Show me the half truths.

I do own a relatively small position in IMPHP. I got back in when I heard the lawsuit was still in the works. In fact, I think it was your post on the FnF board that peaked my interest and I decided to revisit. I mentioned a small position earlier in the month.

[dpsimswm]

When you post things like "IMO, you don't understand X"

I believe you are showing your true colors.

I fully understand how liquidation rights work and your not going to go away. You will continue to troll this board and reiterate your position.

The PROBLEM is that that you don't have a position in this stock do you?

If you are so certain that IMPHP is a winner vs IMPHO, then I encourage you to short IMPHO and buy IMPHP. Then, post that position publicly.

[dpsimswm]

I am not hostile towards IMPHP holders. I actually think they will do quite well. I am hostile towards you and your behavior. I've known you for several years now and know how you work. You antagonize people by posting the half truth and trolling message boards of stocks that you claim not to own.

You intentionally make statements and ask questions that are meant to provoke people into disagreements. Why did you choose to moderate this board if you are not holding this stock?

[Joe Stocks]

>>Liquidation rights give preferred stockholders the book value of the company.<<

Dave, IMO you don't understand liquidation rights. They only come into play during liquidation, dissolution, and wind down. If IMH gets to that point book value can be fleeting. Lehman had positive book value going into BK but will end up with not even the senior debt holders getting half of what they are owed. Preferreds only have liquidation rights over the common. As far as ranking in a liquidation, senior secured get paid first, then senior unsub, then junior subordinated and other unsecured debt; then finally the preferreds, then common. The only time that I have seen liquidation rights being important is if in a liquidation scenario is when it appeared that equity would see a distribution.

I don't see how you see IMPHO's liquidation rights playing out the shareholders unless you do have a liquidation. Can you explain?

Perhaps you could explain your hostility against us IMPHP holders as well.

[dpsimswm]

I am not investing for the lawsuit outcome.

Even if the IMPHP shareholders lose, I think the IMPHP and IMPHO shares are undervalued. They have $25 liquidation preference and voting rights.

Regardless of what Joe Stocks is trying to say, that is a value driver. They have value in the long-run, if the company survives.

[dpsimswm]

Liquidation rights give preferred stockholders the book value of the company. Maybe I need to state this over and over for you.

[Joe Stocks]

kyeh, Good summary.
I made it a "sticky", and moved the link you provided for the court case to the header.

Thanks,

[kyeh]

IMPHO vs IMPHP risks

Ok, I rattled on a bit on my last post so I will just put it plainly.

1) In order for IMPHO shareholders to profit, IMPHP needs to win. There's no path for IMPHO shareholders to profit unless the argument for IMPHP wins.

2) The same argument does not apply for IMPHP. IMPHP shareholders can win even if IMPHO shareholders are left out.

3) #1 and #2 are true because IMPHP received less than the required 66.67% required votes. IMPHO did receive the required number of votes.

4) Even if IMPHP shareholders win, there's no guarantee IMPHO shares will benefit. There's certainly a viable scenario where the judge rules in favor of IMPHP but rules against IMPHO.

As I stated in my previous post -- Judges could have a completely interpretation of the law than us board posters. There's an inherent risk there that the judge sees things differently for IMPHO vs IMPHP which is why IMPHO is valued at roughly 1/2 of IMPHP right now.

[kyeh]

RE: IMPHP vs IMPHO

I've reading the replies and I'm going to chime in here.

Full disclosure: I am long both IMPHP and IMPHO. (More P less O)

I think we can all try to pretend to be the lawyer or judge trying this case but the only opinion that truly matters is what this particular judge thinks of the language and the case being tried.

Please keep in mind: We can all argue and reason as to which side has the better argument or how the legal language is spelled out on the amendments -- but at the very end of the day, it's still a human judge with his/her own personal opinions on the case that truly matters. And this judge will rule based on his/her own interpretations.

That being said -- here's my personal view on the lawsuit and as an investor, why I like IMPHP more

If Timms wins and IMPHP and the amendments are nullified, then it's a sure win for all IMPHP shareholders. Plain and simple, IMPHP wins and that's that. No additional risks there.

I'm order for IMPHO shareholders to win, they need IMPHP to win AND win a secondary argument that says IMPHO on is on par with IMPHP. You can all argue the merits of that all you want but at the end of the day, it's still a human judge that decides. Right or wrong, the judge's opinion is the only one that matters. And yes, judges make mistakes too.

My point is that there is clearly more risk with IMPHO than IMPHP and that is why the market has prices the shares as so.

[Joe Stocks]

JW, Read the KKR thing again.

The Series A LLC Preferred Shares will rank equally with any of our equity securities, including preferred shares, that we may issue in the future, the terms of which provide that such securities will rank equally with the Series A LLC Preferred Shares with respect to payment of share distributions and distribution of our assets upon our liquidation, dissolution or winding up ("parity shares").

The section in the prospectus with the "Rank" or "ranking" header only speaks to what happens in liquidation, dissolution or winding up situation. Ranking only comes into play during such times. Just because the preferred are equally ranked, doesn't supersede the IMPHO voting to give up its rights under the prospectus and IMPHP holders not.

Just sell your O's and buy P's. Simple solution.

[jwnoble3]

Clarification for other board members.

"with respect to the payment of distributions." Payment of distributions would include dividends.

Both classes of prefs rank equal, "with respect to payment of distributions."

As a further example, here's a link to another preferred prospectus that utilizes essentially the same rank language as IMPHO prospectus. In the KKR pref., example dividends are also distributions and rank applies to both scenarios (distributions AND distribution of our assets upon our liquidation, dissolution or winding up). Rank applies broadly to rights of any and all payments.

http://www.sec.gov/Archives/edgar/data/1386926/000104746913000177/a2212424z424b5.htm

[Joe Stocks]

Dave, Why miss represent what I said, and address what I actually said? You tell me, when do you get to exercise your liquidation rights. Under what circumstances? What good did the liquidation rights of the Lehman Preferred do for them? If the company sold, then perhaps they come in to play, but most the time it is for dissolution or liquidation of a company. Usually by that point the creditors have more claims than assets before the liquidation rights kick in.

Again, tell me how you seeing the liquidation rights give the preferred shareholders value other than ranking.

[dpsimswm]

I guess new common stockholders won't care about the answer to the question "does liquidation rank matter?"

I am sure they will buy the common shares blindly, not caring about the actual book value of those shares. Why? Because according to Joe Stocks, book value is not important. Liquidation value is not important according to him.

Here's a short primer on book value for you. I am pretty sure it's covered in Finance 101 at most community colleges.

http://thismatter.com/money/stocks/valuation/book-liquidation-value-q-ratio.htm

[Joe Stocks]

JW, You need to then ask yourself when "rank" has importance. It says it right there under the "rank" heading - "upon liquidation, dissolution or winding up of the Corporation".

Sounds like liquidation to me...oh, yeah, they even say liquidation.

This is my last post to you on the subject until the next one.