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The Trustee in this case made compelling arguments that the public disclosure of the proposed compensation terms for litigation counsel would permit the Defendants to gain a strategic advantage over the estate, especially in settlement negotiations. The Trustee argued convincingly that the proposed terms of compensation include certain payment thresholds or break points, which, if known to the Defendants, could influence their posture in negotiations, to the disadvantage of the estate’s recovery. The Trustee believes that the disclosure of the terms upon which it retained litigation counsel already has disadvantaged the estate in the settlement of another adversary proceeding in this Chapter 11 case.
Joel I. Sher, Chapter 11 Trustee for TMST, Inc. v. JPMorgan Chase Funding, Inc., et al., United States Bankruptcy Court for the District of Maryland, Adversary Proceeding Case No. 11-0340
As a result of the motion to dismiss, the Bankruptcy Court pared down the claims from about $1.8 billion to about $1.3 billion.
Order Regarding Sealing/Redaction of Record of Proceedings on Trustees Motion to Employ Special Litigation Counsel (3/27/15)
Accordingly, on or before April 15, 2015, the Trustee and any other party who desires to keep the record of the hearing sealed shall provide the Court with a specification – by page and line numbers - of each portion of the transcript that they seek to have maintained under seal and a statement of reasons why sealing is legally proper for each such portion. The statement should not, itself, set forth the putatively sealed information because the statement shall be placed on the public record to provide access to persons who may object to the sealing.
Order Approving in Part Application to Employ (3/27/15)
Based on the foregoing, the Court concludes that the Trustee has carried his burden to demonstrate that the retention of Susman Godfrey and Shapiro Sher to act as co-counsel to the Trustee in the Adversary Proceeding, on the proposed terms, is appropriate, with one exception.
As to the Committee points out in its objection the proposed retention terms contemplate creation of a lien in favor of Susman Godfrey. The Committee objects to the lien. Such a lien is not, in this Court’s experience, customary. There has been no evidence presented nor explanation given as to why it is reasonable in these circumstances. The Court will not approve the fee structure proposed to the extent that it creates a lien in favor of counsel. The Committee’s objection is sustained to the extent of its opposition to the lien, and overruled as to the remainder of the objection. The Trustee’s application otherwise is APPROVED.
Monthly Operating Report (February)
http://dm.epiq11.com/TMI/Document/GetDocument/2573679
Monthly Operating Report (January)
http://dm.epiq11.com/TMI/Document/GetDocument/2567620
Monthly Operating Report (December)
http://dm.epiq11.com/TMI/Document/GetDocument/2559187
Legal and Professional Fees have totaled $46.3 million to 11/30/14.
I am sure the OCC just wants to make sure the Court knows that it does not want to "rubber stamp" every move by the Trustee.
Despite all the settlements to date, the estate has an accumulated loss of $2.9 million since the post-petition date.
Emergency Motion for Order Authorizing Committee to File Under Seal a Limited Objection to Trustees Application for Order Authorizing Employment of Special Litigation Counsel and Limited Modification of Retention Order of Counsel to Trustee Filed by Official Committee of Unsecured Creditors (12/30/14)
Subject to further discussions with the Trustee, the Committee intends to file a limited objection to the Application, solely relating to the economics of the proposed retention of Special Litigation Counsel and the economics of the modification of the terms of the retention of Counsel to the Trustee, both of which are only disclosed in the sealed document (the “Committee’s Objection”). Accordingly, the Committee believes that the Committee’s Objection must be filed under seal, and doing so is consistent with the Court’s findings in the Order Sealing Trustee’s Application.
Order Granting Motion to Seal/For Order (I) Authorizing the Trustee to Publicly File a Redacted Version of an Application For Entry of an Order Authorizing the Employment and Retention of Special Litigation Counsel to the Trustee and Limited Modification of Retention Order of Counsel to the Trustee, and (II) Authorizing the Trustee to File Under Seal an Unredacted Version of the Application to Employ filed by Trustee Joel I. Sher (12/23/14)
http://dm.epiq11.com/TMI/Document/GetDocument/2550875
Source: Epiq Systems [Docket 2128]
The attorney billings are becoming more and more redacted each month. Looks like some sort of settlement(s) are in the works soon.
Prepetition Unsecured Liabilities
In the Trustee’s most recently filed monthly operating report, for October 2014 (the “Operating Report”), [D.I. 2098-1], the Trustee reports prepetition unsecured liabilities of $3,347,413,881. See Operating Report at 8. The Counterparties have filed proofs of claim in these cases in the approximate amount of $2,588,254,617, and after adjustments made to reflect a recovery in 2012 of more than $71,000,000, the Counterparties’ claims are in the amount of approximately $2,516,584,303 – which represents approximately 75% of the total prepetition unsecured claims in these cases.
Agreed.
http://dm.epiq11.com/TMI/Document/GetDocument/2545155
6. The Trustee, in the sound exercise of his business and legal judgment, has, subject to approval of the Court, filed the Application in order to, among other things, retain Susman Godfrey LLP (“Susman Godfrey”) as Special Litigation Counsel to serve with Shapiro Sher Guinot & Sandler (“SSG&S”) as co-counsel to the Trustee in the Counterparty Litigation and to seek a limited modification of the terms of the retention of SSG&S as counsel to the Trustee.
7. The Trustee believes however that a disclosure of all of the terms of the Application (specifically the terms of the compensation to be paid to counsel), if made public, will affect the course of the Counterparty Litigation and negatively impact the recoveries that the Trustee may ultimately be able to obtain in the Counterparty Litigation. Indeed, the Trustee’s views in this regard were reinforced in the recently concluded case against Barclays Capital Inc. [Civ. No. Case No. ELH-11-01982]. In that case, all of terms of the retention of the Trustee’s special litigation counsel were set out in the Trustee’s application to employ special litigation counsel filed with the Court and thus were available to Barclays. In the Trustee’s opinion, Barclays used this information to shape its litigation and settlement strategies to the detriment of the Debtors.
8. In light of the foregoing, the Trustee proposes to file a redacted version of the Application by redacting only those portions that, if released, would provide adverse parties with information they would use to their advantage, but to the disadvantage of the Trustee and these bankruptcy estates. Under the circumstances, the Trustee submits that the Application contains information that is confidential and could be deemed to be protected by the work product doctrine, attorney-client privilege, or both. Furthermore, the benefit, if any, that may be obtained by disclosing all of the terms of counsels’ engagement is far outweighed by the detriment such disclosure will have to the Trustee’s prosecution of the Counterparty Litigation. The procedure proposed herein has been approved by the Court several times before in this case and is appropriate under the circumstances. See Orders of the Court at Dkt. Nos. 1267, 1275 and 1879.
I'm sorry - you're right, we already knew about this one. I'm getting these lawsuits mixed up. Please disregard previous comments.
Estate received $23 million from Barclays Capital.
Paid out $7.5 million to Susman Godfrey.
Both amounts are detailed in the MOR.
"We will receive 40% of the gross sum recovered by settlement or otherwise.... Notwithstanding the foregoing, our contingent fee will not exceed $7,500,000."
So, the settlement is at least $18.75M. But could be more.
That's ~60 per bond net of Susman's fee. I just checked the price, and the ask has gone up 55 in the last couple days (170-225). More efficient price discovery than I would have expected.
Senior Notes are currently in first position.
Holders previously received a package of Adfitech (ADFT) securities and cash valued at $38.6 million. For each $1000 in principal amount of TMA.GB, holders received $121.88 in value comprised of $78.26 in Adfitech Inc 8% Sr Secured Notes due 3/05/20 (ADFT.AA), $37.60 (20 shares) in Adfitech common stock (ADFT) and $6.02 in cash. This lowered the remaining claim to $878.12 per $1000 principal amount. The remaining claim is $266.1 million.
Senior Subordinated Note holders have a claim of $1.3 billion, while Junior Subordinated Note claims are $213.8 million.
I assume there are a whole host of creditors and claims ahead of our notes ... right?
Susman Godfrey was hired as Special Litigation Counsel specifically for the Barclays Capital case.
The assignment was on a contingency fee basis.
Judge Kier granted the Order on 4/22/11.
http://dm.epiq11.com/TMI/Document/GetDocument/1355696
I noticed last week that they quietly slipped in a docket to approve payment of $7.5 million to Susman. The 7.5 M was the max payment possible for Susman in the fee contengent contract.
Must have been for the Barclays win, or something even bigger?
Expect the remaining cases to be resolved during 2015.
October MOR out, BarCap settlement received so total assets equals $38,295,680.
http://dm.epiq11.com/TMI/Document/GetDocument/2543279
With 300,000 notes outstanding that's $127.65 per.
The notes traded back up above this value after the MOR came out:
http://finra-markets.morningstar.com/BondCenter/BondTradeActivitySearchResult.jsp?ticker=C170460&startdate=08/01/2012&enddate=11/25/2014
the attorney billings has a lot of redaction. JPM is always close to the blackout words. Something is in the works. I bet they settle out of court.
The potential big payday will come from Joel I. Sher, Chapter 11 Trustee for TMST, Inc. v. JPMorgan Chase Funding, Inc., et al.
Sher is seeking $1.9 billion.
Less than $500,000.
For the period from the Petition Date through and including the date on which the Trustee transferred all servicing rights of TMHL in and to the Whole Loans to the designees of each of the Counterparties, TMHL had been responsible for, and had paid to Cenlar, certain shortfalls in borrower principal and interest payments and certain tax and escrow shortfalls of the borrowers associated with the Whole Loans (the “Advances”). In the August 2010 Whole Loans Stipulation and Order, the Trustee asserted that, as of March 31, 2010, the aggregate approximate amount of Advances that TMHL paid on account of the Whole Loans for which it was not reimbursed was $493,040.04 (the “Accrued Advances”).
how close is this trial to being finished? How much could we realize?
The Stipulation relates only to the transfer of Whole Loan Servicing Rights suit, which includes some of the same defendant parties involved in Joel I. Sher, Chapter 11 Trustee for TMST, Inc. v. JPMorgan Chase Funding, Inc., et al., United States Bankruptcy Court for the District of Maryland, Adversary Proceeding Case No. 11-0340
What's this stipulation agreement filed on the docket mean for us?
Stipulation By Greenwich Capital Financial Products, Inc., RBS Financial Products, Inc., Credit Suisse Securities (USA) LLC and Credit Suisse International and Joel I. Sher, Chapter 11 Trustee, Credit Suisse International, Credit Suisse Securities (USA) LLC and RBS Financial Products, Inc. / Greenwich Capital Financial Products, Inc. Filed by Todd Michael Brooks (related document(s)[1025] Order on Motion for Miscellaneous Relief, [1333] Complaint filed by Trustee Joel I. Sher). (Brooks, Todd)
Joel I. Sher, Chapter 11 Trustee for TMST, Inc. v. JPMorgan Chase Funding, Inc., et al., United States Bankruptcy Court for the District of Maryland, Adversary Proceeding Case No. 11-0340
The Answer Deadline is 11/19/14.
Flurry of trades after nothing for two months:
http://finra-markets.morningstar.com/BondCenter/BondTradeActivitySearchResult.jsp?ticker=C170460&startdate=08/01/2012&enddate=10/30/2014
I am wrong.
If you look at the income statement,, Other Non-Operating Income has a footnote:
(4) Accumulated total includes settlement with Goldman, Sachs & Co. related to margin calls and liquidation of collateral...
Thanks EI, it seems I may have been mistaken as to the provenance of that $1.5M payment.
Still, puzzling why they would need to redact the payor in the cash receipts section if the settlement and amount is spelled out in the note you reference. Also puzzling why we have not seen a Goldman payment given the deadline of 10 business days from the court order approving the settlement. Presumably this means that Goldman has not yet been provided wire instructions from the trustee.
Enterprising Investor
Re: vpagano post# 190
Post 191 of 201
July 18 was a Friday.
Quote:Payment is due within 10 business days after the later of (a) Bankruptcy Court order approving the Settlement Agreement becomes final, or (b) the date GS is provided an acceptable IRS Form W-9 and wire instructions.
So, we must wait another month to solve the puzzle.
Order Granting Trustees Motion For Approval of Settlement and Compromise of Controversies Between the Trustee and Liberty Mutual Insurance Company (8/27/14)
Source: Epiq Systems [Docket 1881]
The settlement required Liberty Mutual to pay $2.275 million minus legal fees and other costs (see MOR page 8).
MOR out and only a $1.5M payment from a redacted payee. Presumably this is the Goldman settlement. A little underwhelming.
Thinking out loud on the math to make us whole using 30% lawyer fees (per note):
$878.12 to make whole -
~$75 in assets via MOR -
~$52 post-lawyer fees via Barclays -
~$40 via Goldman (25%ish recovery and 30% fees)
$711.12
$711.12 * 300K notes = $213,336,000
x= recovery amount
x - 30%x = $213,336,000
x = $304,765,714
$304,765,714 / $1,900,000,000 = 16% recovery via JPM needed
If they can get anything meaningful, I say pay 'em as it will benefit us nicely.
-Pagz
Maybe Susman Godfrey should be engaged for the case against JPM, too?
30ish% fee to lawyer seems about par for the course. I've seen 40% in some other situations I've been involved in.
Now, all eyes on JPM.
Application for Compensation (of Contingency Fee) for Susman Godfrey LLP, Special Counsel, -, Fee: $7, 500, 000.00, Expenses: $0.00. (8/20/14)
2. With the Settlement Agreement in place Jurisdiction and Venue , the Trustee seeks approval to compensate Susman Godfrey from the proceeds of the Settlement pursuant to the terms of the Retention Agreement approved by the Court in the Order Approving Chapter 11 Trustee’s Application for Entry of an Order Authorizing the Employment and Retention of Susman Godfrey LLP As Special Litigation Counsel to the Trustee [Dkt. No. 1316] (the “Employment Order”) in an amount equal to Seven Million Five Hundred Thousand Dollars ($7,500,000.00), the capped contingency fee amount the Trustee agreed to pay Susman Godfrey .
7. With respect to compensation, the Trustee sought to engage Susman Godfrey on the following variable contingency fee basis: twenty percent (20%) of the gross sum recovered by a settlement up to and including September 30, 2011; thirty-three and one third percent (33-1/3%) of the gross sum recovered by a settlement that is agreed upon, or other resolution that occurs, on or before the 60th day preceding any trial or arbitration setting that is then in place; and forty percent (40%) of the gross sum recovered by settlement or otherwise after that date, plus reimbursement of reasonable out-of-pocket expenses and disbursements incurred in connection with the litigation.
8. The Court held a hearing on the Initial Application on April 21, 2011. No interested party objected to the Initial Application or the contingency fee arrangement provided for therein. Importantly and notwithstanding the aforesaid, any contingency fee awarded to Susman Godfrey would not exceed $7,500,000. In the Initial Application, the Trustee submitted that this contingency fee arrangement was reasonable.
[...]
26. There have been no developments in the Barclays Case since the entry of the Employment Order that were incapable of being anticipated when the contingency arrangement was approved and/or render the contingency fee arrangement between the Trustee and Susman Godfrey improvident. “A settlement prior to trial is capable of being anticipated.” Merry-Go-Round, 244 B.R. at 337. A pretrial settlement and a recovery of $23 million in the Barclays Case were capable of being anticipated. See id. (concluding pretrial settlement of $185 million though highly unlikely when the contingency fee was approved was not incapable of being anticipated and explaining, “it would be ironic to deprive counsel of the benefits of its contingency fee agreement because counsel was successful in obtaining a highly successful result against great odds”). Most importantly, the amount sought to be paid to Susman Godfrey under the Retention Agreement – the capped contingency fee amount of $7.5 million - was contemplated and thus foreseeable because the Retention Agreement expressly set the amount as the ceiling fee capable of being paid to Susman Godfrey for their legal services in the event of a recovery. Indeed, absent the cap, Susman Godfrey would otherwise be entitled to compensation in the amount of $9.2 million, as this matter settled within sixty (60) days of trial.
27. Without the skill, time, and reputation expended by Susman Godfrey in the Barclays Case, the Trustee has no doubts that the Settlement would have been unachievable. The contingency fee to be paid to Susman Godfrey under the Settlement Agreement was and remains more than reasonable. Indeed, if the Retention Agreement did not include a cap of $7.5 million, the Trustee would enthusiastically advocate for the payment of Susman Godfrey in an amount equal to 40% of the Settlement amount or $9.2 million. As it stands, the Trustee enthusiastically advocates for approval of this Application and the approval of the payment of $7.5 million to Susman Godfrey upon the Trustee’s receipt of the $23 million in proceeds from the Settlement.
My expectation was that the first deal would set the standard and the pace of settlement would really pick up moving forward.
These cases were never going to trial. Weird things can happen. Does anyone remember Texaco, Inc. v. Pennzoil Co.?
56Chevy and I had discussed potential outcomes on these type of cases, but I do not think we ever shared publicly. I thought the estate would settle for one-quarter, maybe one-third, of total claims excluding the case against JPM. I have no idea on that one.
Thanks for sharing with us. I no longer scan Epiq daily.
Assuming we got around the same settlement recovery with Goldman (25%), that creates $17M + $23M from Barclays + $23M in assets = $63MM.
$63MM / .3MM notes = $210 per vs. $120 on last trade
Risk / reward still strong with the large JPM suit to go, if things are how I see.
Looks like a settlement with Barclays just popped up:
http://dm.epiq11.com/TMI/Document/GetDocument/2513318
The Proposed Settlement
19. Subject to the terms and conditions of the Settlement Agreement, Barclays has agreed to pay the Trustee Twenty-Three Million Dollars ($23,000,000.00) in full and final satisfaction of any and all claims, demands, obligations, liabilities, and causes of action of whatsoever kind and nature asserted in, which could have been asserted in, arising out of or related to the allegations set forth in the Complaint and/or the District Court Action, including, but not limited to, claims arising out of or related to any repo transactions entered into between Barclays or any of its affiliates and any of the Debtor Releasing Parties (as defined in the Settlement Agreement), margin calls in respect of such transactions, and the liquidation of collateral posted by the Debtor Releasing Parties in respect of such transactions.
July 18 was a Friday.
Payment is due within 10 business days after the later of (a) Bankruptcy Court order approving the Settlement Agreement becomes final, or (b) the date GS is provided an acceptable IRS Form W-9 and wire instructions.
MOR is out but I don't see anything in it about Goldman when I checked over lunch. Do you?
So it looks like we will have to wait until the next MOR to see what Goldman settled for. No payment in this one.
Order Granting Motion to Approve Stipulation/Settlement and Compromise of Controversy Between the Trustee and Goldman, Sachs & Co. (7/18/14)
Payment is due within 10 business days after the later of (a) Bankruptcy Court order approving the Settlement Agreement becomes final, or (b) the date GS is provided an acceptable IRS Form W-9 and wire instructions.
http://dm.epiq11.com/TMI/Document/GetDocument/2504451
...accumulation afterwards quickly reversed my previous post. Feel free to delete, don't want to clog up things for new investors.
Someone sure did want to dump some notes it looks:
http://finra-markets.morningstar.com/BondCenter/BondTradeActivitySearchResult.jsp?startDate=&postData={%27Keywords%27:[]}&ticker=C170460&startdate=08/01/2012&showResultsAs=B&debtOrAssetClass=&endDate=&enddate=7/10/2014
Hopefully they don't know something we don't.
The May MOR is out, at first glance nothing new in it for now so I won't post the link.
Assets per senior note = appx. $80 each
-V
Terms may be redacted, but a future MOR will detail the results in cash.
Speaking of MORs, the May report is running a little late.
Something new for me to work on.
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Sr Subordinated Note holders have a claim of $1.3 billion, while Jr Subordinated Note claims are $213.8 million.
All claim amounts listed above do not take into account any post-petition interest payable from the filing date forward.
Court - Case Numbers- Defendant(s)
USBC Maryland | Docket Date | USDC Maryland | Defendant(s) | Damages | Recovery |
10-00137 | 3/2/2010 | 10-01895 | SAF Financial et al | $22 Million | Settled for $6.5 Million |
11-00329 | 4/28/2011 | 11-01982 | Barclays Capital Inc | $94 Million | Settled for $23 Million |
11-00337 | 4/29/2011 | 11-03192 | Countrywide Home Loans | / | Settled for $3.1 Million |
11-00338 | 4/30/2011 | 11-02796 | Goldman Sachs | $71 Million | Undisclosed |
4/30/2011 | 11-01998 | RBC Capital Markets LLC | $35 Million | Settled $31.125 Million | |
11-00340 | 4/30/2011 | JP Morgan Chase et al | $1.3 Billion | RBS Settled for $23.5M |
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