Washington Mutual Debt

[Enterprising Investor]

Rule Seeks Data on Bankruptcy Creditors

By MIKE SPECTOR
Distressed-debt investors forming creditor committees in bankruptcy courts will have to disclose details of their holdings under a new rule making its way through the federal judiciary.

The new rule would make hedge funds and other investors in debt of troubled companies reveal their identities and holdings whenever they band together on committees to influence the outcome of bankruptcy-court cases.

Current disclosure is spotty, with many investors arguing they aren't subject to existing rules that demand information on their holdings.

But, in a victory for hedge funds and other investors, the rule won't require disclosures of purchase dates or prices paid for bankruptcy claims.

The new rule's language, drafted by a panel of judges and other bankruptcy professionals, made the rounds in the email in-boxes of lawyers, restructuring bankers and judges Wednesday.

The official proposed rule now makes its way to another federal judiciary committee before eventually heading to the Supreme Court for review. If the Supreme Court adopts the rule, Congress can overturn it.

The rule attempts to get a handle on the changing corporate-restructuring landscape. For years, companies negotiated with banks holding their loans to restructure. Now, hedge funds and other traders buy loans and bonds of companies at discounts, then work to influence restructurings to make money on their bets.

These investors often form unofficial committees to litigate in court and maximize their returns. Efforts to change the disclosure rule—known as bankruptcy rule 2019—have intensified in recent months after a series of conflicting court decisions over whether investors on informal creditor or equity committees must disclose their holdings.

Hedge funds and their allies had fought against provisions requiring disclosure of when claims were purchased and at what price, arguing the information would reveal proprietary trading strategies. Hedge funds had hinted they might take their money out of bankruptcy cases if forced to reveal too much.

"It chills participation if you have to make the exhaustive disclosure," said Martin Bienenstock, a lawyer at Dewey & LeBoeuf who counts hedge funds among his clients.

Still, the new rule would make investors disclose their "economic interest" in bankruptcy cases, including debt, equity or short positions such as credit-default swaps, which act as insurance against debt when it defaults. Judges have expressed concern that investors banding together on court committees have at times revealed their underlying debt holdings but failed to disclose their CDS positions.

Investors on committees will have to disclose the quarter and the year in which their positions were acquired. Disclosures are waived for positions acquired more than a year before the company's bankruptcy filing. If hedge funds make arguments in court or solicit votes for confirmation of a bankruptcy plan, additional disclosures will be required if investment positions have changed since a previously filed statement.

Many of these investors argued they weren't subject to the current rule, based on technical legal language related to whether their efforts amounted to acting as an official "committee." The new rule makes clear that any investor banding together on a court-sanctioned committee will have to make disclosures.

http://online.wsj.com/article/SB10001424052748703890904575297152532750936.html?KEYWORDS=bankruptcy+creditors&mg=com-wsj

[Enterprising Investor]

J.P. Morgan, WaMu, Regulators Settle Dispute

By DAN FITZPATRICK And ROBIN SIDEL
A lingering chapter of the 2008 financial crisis closed Friday when Washington Mutual Inc., J.P. Morgan Chase & Co. and federal regulators settled a dispute over billions of dollars in assets once belonging the failed Seattle-based thrift known as WaMu.

The September 2008 collapse of Washington Mutual was the largest bank failure in U.S. history. J.P. Morgan, which then paid $1.9 billion for Washington Mutual's branches and deposits, now has agreed to fork over $4 billion in disputed deposits to WaMu's bankrupt parent company, in exchange for more than $6 billion in other assets. The Federal Deposit Insurance Corp. will walk away with about $1.5 billion in federal tax refunds.

WaMu's bankrupt parent intends to use the $4 billion to repay creditors. WaMu bonds were broadly higher on the news, with most trading at about around 45 cents to 50 cents on the dollar.

The settlement, which still needs the approval of a bankruptcy judge, will end a year and a half of disputes among the three parties and could quiet arguments about whether the forced 2008 closure and sale had to happen the way they did.

Washington Mutual has agreed to drop a separate suit in U.S. District Court and not go after J.P. Morgan or the FDIC in any matter relating to the demise of WaMu, as the bank was known.

Debtholders, though, still have a case before a U.S. District Court judge alleging that J.P. Morgan engaged in a plan to pull down the value of the WaMu banking subsidiaries so it could pick them up at a bargain. An attorney for the debtholders said his clients have no plans to drop that case.

Washington Mutual was seized after customers pulled $16.7 billion, ending the life of an institution that began in 1889 and had become the nation's fifth-largest financial institution, thanks in part to a subprime-mortgage lending push. J.P. Morgan assumed the assets of the banking subsidiaries, and the parent sought bankruptcy protection.

The disagreement centered on what J.P. Morgan really bought when it assumed the assets.

J.P. Morgan tried to claim ownership of the disputed $4 billion in deposits by arguing they were a capital contribution to Washington Mutual's banking operations from its holding company, while WaMu said the $4 billion represented deposits made by the parent.

The settlement awards the $4 billion to WaMu, while J.P. Morgan gets about $4 billion in trust preferred securities and $2.1 billion in tax refunds. Among the other disputed assets awarded to the New York bank is a $20 million wind farm.

J.P. Morgan's relinquishment of $4 billion in deposits is expected to have little impact on the giant bank, which had $930 billion in deposits at the end of 2009. A bank spokesman said J.P. Morgan is "encouraged" by the new agreement.

WaMu attorney David Elsberg of Quinn Emanuel Urquhart Oliver & Hedges LLP said the settlement "provides substantial recoveries" for the creditors and "vindicates the position we took in court."

An attorney for WaMu's creditors couldn't be reached for comment.

The acquisition of WaMu was part of J.P. Morgan's strategy to become a national retail bank with a presence in markets coast to coast. The deal added some 2,200 branches to J.P. Morgan's Chase retail network of more than 3,000 branches.

[Enterprising Investor]

WaMu deal resolves fallout from record bank failure.

* WaMu gets nearly all of $4 bln deposit

* JPMorgan and WaMu to split $3 bln tax refund 70-30

* FDIC and WaMu to split $2.6 bln tax refund 60-40 (New throughout)

By Tom Hals

WILMINGTON, Del., March 12 (Reuters) - Washington Mutual Inc (WAMUQ.PK) said on Friday that it reached a deal that will bring it roughly $6 billion and help resolve its bankruptcy, but it could leave shareholders in the cold.

The company, which is tied to the biggest bank failure in U.S. history, will gain ownership of a bank deposit that is worth about $4 billion. JPMorgan Chase & Co (JPM.N) also had claimed the deposit.

It also agreed to split two potential tax refunds worth a combined $5.6 billion with JPMorgan and the Federal Deposit Insurance Corp.

While the transaction brings the three parties into agreement for the first time after 18 months of legal battles, it sets up the next likely fight: the deal depends on the disallowance of billions of dollars in claims by holders of bonds issued by Washington Mutual Bank.

The company recognizes $7 billion in general unsecured claims stemming from Washington Mutual notes, although more than $100 billion of claims have been lodged. The money brought into the estate will go to paying off creditors.

Shareholders also are likely to fight the agreement. An attorney for the official committee of equity holders told the court that nobody told him about the settlement.

Shares of Washington Mutual common stock fell as much as 70 percent after the deal was announced. Preferred shares, which have a higher-priority claim on the company's assets, rose 9 percent.

Shares of JPMorgan were little changed at $43.37 in afternoon trade.

The Seattle-based Washington Mutual filed for bankruptcy in September 2008, during the same financial crisis that felled Lehman Brothers Holding Inc, Merrill Lynch and banks across Europe. Washington Mutual's jittery depositors yanked nearly 10 percent of the bank's $188 billion in deposits in a matter of days, prompting regulators to seize the operation.

After it was seized, the FDIC sold the bank to JPMorgan (JPM.N) for $1.9 billion.

Friday's deal will return a bank deposit worth about $4 billion to Washington Mutual, minus $172 million.

The deposit was also claimed by JPMorgan which had described Washington Mutual's bookkeeping as a "shell game" and said money might have been a capital contribution that allowed the bank to meet regulatory requirements.

The deal also splits the company's two expected tax refunds. Washington Mutual agreed to receive $900 million of a $2.6 billion expected return, with the rest going to JPMorgan. A second $2.6 billion return will be bring in $1.04 billion for Washington Mutual with the rest going to the FDIC.

The company's reorganization plan is really a plan for distributing assets to creditors. Little will remain of the company that was founded in 1889 to help fund the rebuilding of central Seattle after a devastating fire.

Most of what was once 2,200 branches and 40,000 staff as well as books and records are now in the hands of JPMorgan.

The company's seizure and bankruptcy have been steeped in controversy and become fodder for conspiracy theories, particularly among shareholders.

The bank said in court documents that JPMorgan may have leaked information to regulators that led to its collapse. It cited records from other court cases that suggested JPMorgan had planted "mole" employees at Washington Mutual to glean information.

As part of the agreement, Washington Mutual will not pursue litigation over its collapse against JPMorgan or the FDIC.

The case has also realigned what passes for the natural order of things in bankruptcy, with JPMorgan fighting against hedge funds that hold the company's bonds.

In most other large bankruptcies such as Readers Digest [RPPLER.UL] and Tribune Co (TRBCQ.PK), JPMorgan has been a tough negotiator on behalf of hedge funds, who it depends on to buy the securitized loans it generates.

The company said it will finalize the agreement and include it in a plan of reorganization it expects to file with the Delaware bankruptcy court by the end of March.

The case is In re Washington Mutual Inc, U.S. Bankruptcy Court, District of Delaware (Wilmington), No. 08-12229. (Reporting by Tom Hals. Editing by Robert MacMillan)

http://www.reuters.com/article/idUSN1215250120100312

[Enterprising Investor]

Selected Prices (old symbol/new symbol):

WM.HE/WAMU.HE
70.050
1.050
09/04/2009 16:17:21

99.600
0.100
01/19/2010 16:29:27

WM.IZ/WAMU.IZ
29.750
0.250
09/03/2009 15:43:08

42.250
1.250
01/14/2010 12:39:32

[rainbow1111]

Excellent find! Thank you very much. Do you have access to more current reports from Owl Creek?

[marayatano]

I have no idea, but that is the rumor.

I believe it is a combination of speculators, shorts covering, traders, etc.

Also, I recently saw a "pumper" or promoter stating that WAMUQ will hit $1.00. If the promoter is successful, we may just hit $1.00.

Another, is if you are in to technical, we may just test .20 / .21 again. We will see it we break it this time.


Thanks.

[norkel]

thanks

WAMUQ > you think they are close in settlement the way its been trading of late?

tia :)

[Enterprising Investor]

Prices

WM.HE 939322AE3 8.25 04/01/2010 70.050 1.050 - 09/04/2009 16:17:21
WM.IE 939322AL7 4.00 01/15/2009 86.551 -0.469 - 09/04/2009 12:12:02
WM.IH 939322AN3 4.63 04/01/2014 68.500 -3.500 - 09/03/2009 15:47:10
WM.IL 939322AP8 4.20 01/15/2010 87.500 2.500 - 09/04/2009 14:58:27
WM.IM 939322AQ6 3.09 01/15/2010 87.750 -0.500 - 08/07/2009 12:51:42
WM.IO 939322AS2 3.50 03/22/2012 89.000 - - 09/02/2009 13:45:16
WM.IP 939322AT0 5.00 03/22/2012 87.000 0.400 - 09/02/2009 12:26:56
WM.IS 939322AU7 3.22 09/17/2012 89.375 0.625 - 09/01/2009 11:35:52
WM.IT 939322AV5 5.25 09/15/2017 86.500 -1.000 - 09/04/2009 15:54:04
WM.IX 93933VAZ1 1.26 05/01/2009 30.125 -0.125 - 09/03/2009 14:08:00
WM.IY 93933VBD9 5.55 06/16/2010 29.500 -0.938 - 09/02/2009 10:18:08
WM.IZ 93933VBE7 0.77 06/16/2010 29.750 0.250 - 09/03/2009 15:43:08
WM.JB 939322AW3 2.95 08/24/2009 88.750 1.000 - 08/21/2009 10:31:56
WM.JC 939322AX1 5.50 08/24/2011 86.250 -0.750 - 09/01/2009 13:05:09
WM.JG 939322AY9 7.25 11/01/2017 68.000 -4.750 - 09/03/2009 15:57:26

[marayatano]

In my opinion, and only my opinion, the recent surge has to do with short cover coupled with volume alerts to day traders which brought even more volume/buying pressure. Some may hit "short SQUEEZE" territory.

Recently, the SEC made a permanent ban on naked short selling. Shortly thereafter, there was some short covering. As time went by, all naked shorts did not cover. It is my opinion that these brokerages gave warning that they (shorts) will have to cover soon because of the SEC ban and the unavailability of share to be borrowed for shorting. I bet some of these brokerages closed out some of these short positions on their own after unheeded warnings.

This happened on all stocks, especially the Q's which usually have a ton of naked shorts.

Do not be surprised that after the short covering is over that alot of these stocks come back down in value.

Thanks and good luck.

[norkel]

hi again

any new thoughts on WAMUQ and LEHMQ?

tia
:)

[norkel]

thanks

[marayatano]

Sorry, the ones that were knowledgeable do not seem to post anymore or often. I, myself, hardly post there anymore. Most that post now are new and probably bought at a much higher price. The original people bought when WAMUQ was at 2 cents and WAMPQ was at $2 to $4.

It has gone up substantially. I think most of us who have our free shares are just holding and playing other stocks while we wait for settlement/resolution.

So I really can't answer your question, but I can tell you that WAMU has a much higher chance to getting recovery all the way down to common and sooner than Lehman.

imo

[norkel]

thanks
can you give any names on the boards that are knowledgeable with WAMU ?
tia
:)

[marayatano]

Norkel: Answer to your question.
CIT-A, anything is possible. Everything points to having CIT do something soon, especially after their new agreement with the Fed Reserve New York.

As for WAMUQ, good chance of recovery there because FDIC prematurely seized Wamu. WAMUQ has been winning the motions against the FDIC and JP Morgan. JP Morgan is running out of tactic of stalling. THere are quite a few lawyer and a judge following the Wamu Case who posts on the board.

[norkel]

one more thing, you thik CIT-A could hit $20 ?
tia again
:)

[norkel]

hi there,
iyo you think wamuq will get cancelled?
tia
norkel

[marayatano]

Ya, with Wamu, the Toprs you refer to is WAHUQ. I think they are very likely to be paid off, but next in line is WAMPQ and WAMKQ. There is only approx. 500 Million to pay WAHUQ then WAMPQ/KQ is next in line. Better risk and return ratio on WAMPQ.

I was looking into buying debt that is in BK that is distressed since I know it will be a debt for equity swap in the end. I was looking at Trump Entertainment (?). Trump recently said he was going to buy the assets of the BK'ed company, but it does not look like the debt will have a return. Trump screwed EVERYONE. I am still keeping an eye on it though.

I have to run again. Going to lunch and have to pick my my car from repair shop. Arrh...

Thanks.

[Enterprising Investor]

My original plan was buying debt.

The values tend to be too solid - a good return - so my focus will be TOPrS for a better return.

CIT is interesting.

I am trying to allow my some of my investments liquidate in advance of tax selling season. I usually fail just like people who make New Year's resolutions. Something always comes along.

[marayatano]

Enterprise, thanks for the link/post.

Yes, I have come across that exact same document. That same fund/entity has been on CourtCall as an interested party, if I remember correctly. There were others like Silver Point (?), and I cannot remember the rest. There was also another entity buying unsecured claims. Thanks for the reminder.



Also, the latest development (that I do not have much info on) is that a subsidiary (Washington Mutual Bank fsb) of Washington Mutual Bank had a $17 billion "surplus" (on top the $4.4 billion publicly known). This points to Wamu having access to liquidity before the seizure.


I have not been following Wamu too much lately, but still have my shares.

I having been playing CIT Group, but after the last press release for CIT (of divy suspension), I sold all my preferred shares. Now just keeping an eye for an opportunity.

In my opinion, CIT may convert preferred shares to common. Here is the interesting part though: Citibank /Citi Group did a conversion to common at par value for the government and 95% at par value for the public. I believe that CIT Group may do the same/similar. Right now, CIT preferreds are trading below 10 cents on the dollar. I am waiting to see if there is an opportunity at a less risky PPS. You may want to put it on radar: CIT.PR.A and CIT.PR.C (ETrade)

Also, as you know, CCYPQ is not at $2.00. Slowly but surely. Just wondering, was any of that you between $1.65 up to $2.00? I was trying to add more, but my limit never filled.

Once again, thanks for the post.

I am going out. So talk to you later.

[Enterprising Investor]

Owls Creek's 4Q 2008 letter details buys.

See Exhibits section.

http://www.scribd.com/doc/11985445/Owls-Creeks-Fourth-Quarter-Letter-to-Investors

[Stock]

Not a stock

But in the correct category - congratulations.

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