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Yes, WMI loses exclusivity May 26. They can still submit their plan for a vote, but so can anyone else.
WMI's exclusivity ends May 26. Objections to the plan are due after May 26. Thus, the plan can NOT get approved before exclusivity ends....on May 26.
WMI has effectively lost exclusivity. When May 27 rolls around, the plan can absolutely NOT be approved, and WMI will no longer have exclusivity.
There is still no guarantee that their plan will be approved after May 26.
Our fate does not solely rest in the hands of the WMB bondholders.
The EC was granted the same authority as an Examiner.
The EC was granted the right to hold a shareholder meeting.
Cayman Preferred holders might still object to the settlement.
WMI's exclusivity will run out next Wednesday. Objections to this newly signed POR/Settlement aren't due until after Wednesday, so WMI effectively has lost exclusivity. That is huge for us.
The DS and POR still need to be approved by the judge, and then there will be a hearing to accept/object the POR.
The approval of FDIC means nothing. They forced the OTS to sieze WMI and 24hrs later gave WMI to JPM for 1.88bil! Anyone who thought FDIC would not sign the agreement is foolish.
This is far from over for the shareholders, barring a true global settlement which includes shareholders.(No reason for JPM,WMI,FDIC to agree to one yet though)
Wamuq will rise and fall next week and the weeks after. Nothing new there.
Can't wait to see the "numbers" in the new POR.
Vapor Settlement, did everyone forget already?
Rosen said the deal, which could result in the dismissal of three lawsuits pitting WaMu, JPMorgan and the FDIC against one another, also is contingent on the resolution of claims from holders of billions of dollars of bonds issued by Washington Mutual Bank, or WMB. Without the bondholders' approval, or the disallowance of their claims in their entirety, the settlement could turn to "vapor," Rosen said outside court.
http://finance.yahoo.com/news/WaMu-reaches-settlement-with-apf-857239443.html?x=0&.v=5
Or a sign that the FDIC is still not on board.
<What is the value of these entities that they would be mentioned on this PR?>
The value of those entities will not be released until equity is wiped out and WMI has reorganized. Only then, will they figure out the value.
Much like the $9bil in value for the WMB worthless stock loss write-off...which few seem to talk about.
For a non-sarcastic reply please see my post regarding the sub, WMI Mortgage Reinsurance Company:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48335682
WMI has not written off the WMB worthless stock loss....yet.
There is roughly $9bil in value in the WMB worthless stock loss write-off, if WMB stock was valued at $26bil times 35% corporate tax rate.
Many people have brought up that $9bil in value previously, myself included.
That $9bil in unrealized value is definitely one of the future treasures that the bondholders/creditors will later dig up if they are successful with their "proposed plan".
<Considering WMI owned ALL the stock
in WMB during the eligible time of the tax losses>
WMI STILL owns all stock in WMB.
"JPMorgan will also receive a larger portion of the tax refunds, up to $2.4 billion from a previous estimate of $2.1 billion, according to court documents. The FDIC would receive as little as $800 million, down from $1.67 billion under a previous plan."
http://www.reuters.com/article/idCNN1715704420100517?rpc=44
Wow.
Good Post, I agree.
"I think the EC is fully able to conduct the investigation it seeks to have the examiner conduct."-Judge Mary Walrath
That pretty much sums up the hearing.
Most, if not all, of us(shareholders) wanted the motion for the third-party examiner approved. It was not.
But, who would have guessed that THJMW would say that the EC is now the examiner?
You are right Fish, people need to wake up and read(or listen to) what the judge said.
The EC is the examiner!
And some people have posted that there not being enough time for the EC to do an investigation, or that the FDIC might agree with the POR to avoid the Examiner(EC). Well, the judge covered that in the hearing:
THJMW said she was, "not sure how quickly the debtor honestly can proceed with its proposed plan" and that there is, "sufficient time for the EC to conduct whatever investigation it feels is relevant".
WMI Noteholders File Rule 2019 Disclosure:
http://www.kccllc.net/documents/0812229/0812229100504000000000042.pdf
"The funds seeking the liquidation include units of Bank of America (BAC.N) and Citigroup (C.N) as well as Silver Point Capital and Davidson Kempner Capital."
http://www.reuters.com/article/idUSSGE64404S20100505
Now that is interesting news.
I see where you are coming from, and taken at face value it doesn't make much sense.
(The following numbers are all speculation since FDIC admittedly didn't know the real numbers before(or after) seizure and WMI(Rosen) have not done an audit of WMI's financials)
Here is my stab at answering your question:
Our banking system is based on a fractional reserve with fiat currency. So, a bank can take deposits and make loans against those deposits to the point where the bank only has about 10%(a fraction) of actual money on hand compared to what is lent out.
Most banks will want to get as close to the minimum reserve amount needed so that they can maximize the return on the money that they lent out. If there is a "run" on the deposits, the bank needs to get additional money to maintain their minimum reserve amount(set by FDIC and Federal Reserve).
So, WMI had about 188bil in deposits. The question is, how much had they lent out in loans in that $188bil? If WMI had a 10% reserve, then they could have loaned out $169.2bil and should have $18.8bil in cash as the reserve amount. The $18.8 theoretically is actual cash that was deposited by consumers or financial institutions.
Any loan that defaulted would count against the bank and reduce their minimum reserve amount of $18.8bil needed as cash on hand.
Since JPM purchased the bank, they got the $188bil in deposits and needed $18.8bil cash as a 10% reserve. JPM did raise additional funds to meet the necessary minimum reserve.(the excess cash in WMBfsb probably helped too)
If the $169.2bil in loans made against the deposits earned 5% on average, then theoretically the $18.8bil in actual cash on hand would net $8.46bil in interest each year.
So, WMI with a 10% reserve rate could make loans on 10 times the amount of actual cash they had. If there was a run of $9.4 bil on cash deposits, then WMI would either have to raise an additional $9.4bil in cash or call in half of their loans at $84.6bil to keep their 10% reserve. If there was a massive run, WMI would be on the hook for $188bil of the total deposits. Since they possibly only had 10% in actual cash, the FDIC would have to step in and cover the $169.2bil additional amount if there was a run on all of WMI's deposits. This is why the FDIC is "taking over" WMI and other banks, to prevent that total loss. But, FDIC is usually the one that causes the runs by announcing that they are looking into a bank, and that a seizure is possible/imminent, like in WMI's case. It is pretty much all based on perception.
Long story short, the whole fractional reserve banking system is just a big scam that is dependent on not having bank runs. This is why we have the FDIC ,to create the illusion that there is an insurance or security for people's cash deposits. During the Great Depression there wasn't an FDIC, so when there was a run on the bank's cash deposits, the banks had to call in loans which spiraled the entire system into a crash.
WMI's bank run was probably engineered(by JPM/FDIC with the help of their media, IMO). Since our banking system is run on an illusion of safety, technically it can happen to any bank(with the help of the media) and our entire financial system could crash in 24-48hrs as theorized by many economists.
So, to finally answer your question, "why an acquiring bank would need to ask for anyone to cover losses when there could be no actual loss", as long as the FDIC/media doesn't cause a run on the bank, then yes there is really no reason to ask anyone to cover loan losses unless the overall loan loss rate was unusually high which would cause a need to raise additional funds to meet the minimum reserve ratio.
Despite the grandstanding of Levin in the recent Senate hearing, JPM would not have "stolen" WMI if they thought that WMI would have an unusually high loan default rate. We also know that the OTS said that WMI was solvent at the time of seizure. The Park/West presentation by JPM, and the emails between JPM and the FDIC pretty much show us that the failure/seizure of WMI was planned well in advance of the mysterious "bank runs".
I tried to summarize as best as I could without getting too technical. I hope it answers your question.
Yeah, that doesn't look good(notwithstanding who wrote it), but look at the sentences right before that in the article:
"Terms of the offer by the New York bank previously were kept secret by the Federal Deposit Insurance Corp., which sold the failed banking units to J.P. Morgan Chase & Co. for $1.88 billion in September 2008. The document was disclosed following a Freedom of Information Act request by The Wall Street Journal."
Kinda weird timing by the FDIC to release that now....and to release it to the WSJ. Hmmmm.
If that information was really a bombshell that would have helped JPM and FDIC, they would have released it a LONG time ago.
<"the company will have 180 days or so to prepare financials and get a proxy out before the meeting can be held">
WMI has requested 180 days to complete the financials. There is no guarantee that their request will be granted. It is more probable that their request will be denied.
A company in BK can request an exception from the SEC to hold a shareholder meeting without audited financials.
Under the "internal affairs doctrine," the shareholder meeting
could in fact be held in accordance with Washington law notwithstanding the fact that WMI is not in compliance with SEC filing obligations and, as such, unable to comply with the SEC proxy rules. See Newcastle Partners v. Vesta Ins. Group, 887 A.2d 975, 981 (Del. Ch. 2005) (applying the internal affairs doctrine to conclude that shareholder meeting could be held "where the registrant corporation is delinquent in its SEC filing obligations or is unable to comply with the literal terms of the SEC proxy rules"); see also Esopus Creek Value LP v. Haul, 913 A.2d 593 (Del. Ch. 2006) (concluding that shareholder meeting should not be suspended merely because the company is not in
compliance with federal proxy regulations and allowing a meeting to be quickly scheduled).
Page 18:
http://www.ghostofwamu.com/documents/08-12229/08-12229-3531.pdf
Willingham only owns commons!!??
$4.4bil cash on hand at time of failure-Sheila Bair
No mention of the $20bil plus at WMBfsb
Top ex-WaMu executives come before Congress
http://www.google.com/hostednews/ap/article/ALeqM5gkEUatlRPEzU_VY_sO03lE7nG05wD9F1URB80
"The investors who bought the mortgage securities from Washington Mutual weren't informed of the fraudulent practices, the Senate investigators found. WaMu "dumped the polluted water" of toxic mortgage securities into the stream of the U.S. financial system, Levin said."
Is somebody looking out for WMB bondholders or Cayman Preferred?
Sen. Carl Levin, D-Mich. is the subcommittee chairman.
Hmmm, look who was his #11 campaign contributor from 2003-2008.
http://www.opensecrets.org/politicians/contrib.php?cycle=2008&cid=N00001691&type=I
DLA Piper
That name sounds familiar....oh yeah, DLA Piper is representing FDIC against WMI.
I am sure that wouldn't bias him against WMI...would it?
"Washington Mutual "was one of the worst," Levin told reporters Monday. "This was a Main Street bank that got taken in by these Wall Street profits that were offered to it.""
"“Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river,” Levin said."
http://www.chron.com/disp/story.mpl/business/6956029.html
Project Orca?
"And like their Wall Street colleagues, they shroud their deal-making plans under the cover of code names. (The sale of Washington Mutual was known as Project Orca, while the one for BankUnited of Florida was called Project Beach.)"
http://www.nytimes.com/2010/04/01/business/01FDIC.html
Has anyone heard of Project Orca before?
I can't find anything about this.
Interesting choice of the name, Orca(killer whale).
WMMRC has trust assets estimated to be $460 million.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48335682
http://www.foxbusiness.com/story/markets/industries/finance/report-jpmorgan-mulls-life-jamie/
"The government turned to him to help rescue Bear Stearns in March 2008 and then again to take over Washington Mutual in 2009."
(great factual reporting from Fox Business News)
"Even though Dimon hasn’t hinted at a near-term exit from JPMorgan, the Post reported earlier this year that he has expressed a desire to serve his country, leading to speculation he could be tapped to replace Treasury Secretary Tim Geithner."
There is an indication that there could be some form of stock distribution, with or without cash.
From the Joint Plan:
Without limiting the foregoing, in consideration for the waiver and release of the JPMC Entities from any and claims resulting from, among other things, the issuance or assignment of the Trust Preferred Securities or any commitment, disclosure or non-disclosure with respect thereto, the declaration of any
Exchange Event, as defined in the offering materials relating to the Trust Preferred Securities, with respect to the Trust Preferred Securities by the Office of Thrift Supervision, the assignment of the Trust Preferred Securities subsequent thereto, and any and all claims in any way related to the Trust Preferred Securities or the REIT Series, pursuant to the Plan, on the Effective Date, (a) JPMC shall (i) pay to the REIT Trust Holders Fifty Million Dollars ($50,000,000.00) or (ii) at the election of JPMC, distribute to the REIT Trust Holders shares of common stock of JPMC having a value as of the Effective Date in the amount of Fifty Million Dollars ($50,000,000.00) and (b) each REIT Trust Holder receiving its pro rata share of such consideration shall execute and deliver, or be deemed to have executed and delivered, a release for the benefit of JPMC with respect to the foregoing events.
Page 158. http://www.ghostofwamu.com/documents/08-12229/08-12229-2622.pdf
California BOE says Wamu wasn't sold:
"“I just received a letter last week from the Board of Equalization regarding the JP Morgan acquisition of Washington Mutual informing me that the board determined this did not constitute a sale,” said Ting.
According to Ting, the BOE’s determination prevents a statewide reassessment of the hundreds of Washington Mutual locations. That means every Washington Mutual bank statewide will not be reassessed unless individual county assessor’s choose to challenge the BOE findings."
http://www.examiner.com/x-22701-Sacramento-Statehouse-Examiner~y2010m3d30-With-AB-2492-Ammiano-looks-to-close-a-75-billion-commercial-property-tax-loophole
Nice tax break for JPM.
Liabilities subject to compromise (Pre-petltlon):
Senior debt 4,132,421,622
Subordinated debt 1,666,464,970
Junior subordinated debt 765,674,200
Intercompany payables 684,095,259
Accounts payable 4,480,720
Taxes payable 550,080,833
Payroll and benefit accruals 407,236,707
Other accrued liabilities 86,364,578
Other pre-petition liabilities 198 223
Total pre-petition liabilities 8,296,819,086
Total liabilities 8,314,192,185
Intercompany payables, Taxes payable, Payroll and benefit accruals total = $1,641,412,799
I would really like to see the breakdown of that $1.64bil, and see how much of it is viable.
http://www.ghostofwamu.com/documents/08-12229/08-12229-2737.pdf
Blackhorse did try to get the EC composed of only preferred equity holders.
The counsel for Blackhorse said in the 1-28-2010 hearing that Blackhorse was under the impression that the EC did not have much if any preferred representation.
The Trustee spoke up and said, "6 of 7 EC members hold preferred and some have commons. No members of the EC own Caymans."
Blackhorse and the EC have probably been talking since that hearing based on their recent support of the EC's motions.
Leaks on Y! message board have happened before, and the market didn't react until after the company issued it's official press release.
http://www.thestreet.com/story/10006562/paranormal-systems-message-board-foretold-peregrines-warning.html
"The company, whose stock plunged from $14.51 to $9.27 the day after the early January preannouncement, was trading at $9.56 Friday, down 32 cents."
I am not saying the rumor today is true, I am just saying that the market isn't always "up-to-date" on leaks as we would believe them to be.
Not necessarily, check this out:
http://www.thestreet.com/story/10006562/paranormal-systems-message-board-foretold-peregrines-warning.html
It was written by a child,
"my Dad said to write to you and to Jamie Dimon, because I care. So I did."
"I have money in his bank and in my custodial account. I invested in Wamu shares."
"All I want from Jamie is a fair price. Like he paid to Bear Stearns."
I haven't seen the tax sharing agreement, it would be great if you had a link to it.
But, the claim against the tax sharing agreement isn't the first indication that the FDIC didn't sell all of WMB's assets to JPM.
"WMI still owns all of the outstanding stock of WMB"
Page 3. http://www.kccllc.net/documents/0812229/0812229100319000000000007.pdf
Is is interesting that WMBfsb stock was sold to JPM by the FDIC receiver via the Purchase and Assumption Agreement, but the WMB stock was not.
Page 4. http://www.kccllc.net/documents/0812229/0812229100319000000000007.pdf
As I wrote in a previous post:When the WMB stock is taken from WMI, a substantial worthless stock claim may be filed, and WMI may claim losses on the $29bil as allowed.
The POR is long, but it is definitely a great read.
At the beginning of the POR, Weil lays out a summary of the past court cases and proceedings. They document win after win for WMI and nothing but failures for JPM/FDIC. Then after all of the court successes for WMI, Weil starts abruptly into the "Joint Plan". Weil basically says, "after winning virtually every motion and receiving nothing but favorable rulings over the past 18 months, we've decided it isn't worth it anymore to litigate our case and we want to just give everything away to our adversaries."
As I continued to read the POR, it became very clear that Weil decided to do a complete 180 on everything they had fought for up until now. Weil seems to have abandoned their fiduciary duty to WMI.
There is a lot of value in a number of lawsuits(old lawsuits), and subsidiaries of WMI(such as WMMRC) that Weil seems to dismiss as having a bleak chance at recovery. Of course, we all know the reason he is dismissing those values is to keep A < L.
I think that Solomon is really going to shock most people when they calculate the true value of WMI.
The most concerning thing that I have found in the POR so far is:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48342170
This is all IMO.
Here is some additional good info that I gleaned from the POR:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48335669
"I really think that aside from winding down assets, they may be thinking about using the shell and using the tax advantages to acquire other businesses," said Starke, who cited banking businesses as a possible target.
http://www.reuters.com/article/idUSN2925820320100329
If those hedge fund creditors get their way, they will either purchase other businesses or sell themselves to the highest bidder.
Either way, it is good that the media is finally starting to mention the enormous value that WMI still has, and will have in the future.
Those hedge funds are the WMI creditors that are trying to wipe out equity and reorganize WMI as the new owners.
They will then reissue new stock and raise funds to kick off their brand new company with tons of write-offs and tons of cash.
Appaloosa, Centerbridge, Owl Creek and Aurelius are among equities greatest enemies.
How about $29bil in tax losses to write off for the "reorganized WMI"?
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48349594
Or how about $460mil in WM Mortgage Reinsurance Company (“WMMRC”)?
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48335682
Flip-flopper Starke changing his tone?
What a surprise.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=47653824
"WMI still owns all of the outstanding stock of WMB"
Page 3. http://www.kccllc.net/documents/0812229/0812229100319000000000007.pdf
It is interesting that WMB was seized, and WMI still claims to own all the WMB stock.
The WMB stock was valued at roughly $29bil if I remember correctly. Obviously, WMI will not retain the WMB stock indefinitely as WMB was seized by FDIC. WMBfsb stock was sold to JPM by the FDIC receiver via the Purchase and Assumption Agreement, but the WMB stock was not.
When the WMB stock is taken from WMI, a substantial worthless stock claim may be filed, and WMI may claim losses on the $39bil as allowed.
If the FDIC does not take the WMB stock from WMI before a settlement, but takes it after, any creditors or equity not included in the settlement would lose out on potentially large NOL's.
Worthless Stock Loss
http://www.irs.gov/pub/irs-wd/0226004.pdf
Section 165(g)(3) provides an exception allowing ordinary loss treatment for stock in certain affiliated corporations, even if the stock is a capital asset. To qualify, the taxpayer must meet certain requirements found in section 165(g)(3), which we assume that have been met in the current case.
The essential standards for a determination of worthlessness are lucidly set forth in Morton v. Commissioner, 38 B.T.A. 1270, 1278-79 (1938), nonacq. 1939-1 C.B. 57, aff'd, 112 F.2d 320 (7th Cir. 1940): From an examination of [the] cases it is apparent that a loss by reason of the worthlessness of stock must be deducted in the year in which the stock becomes worthless and the loss sustained, that the stock may not be considered worthless even when having no liquidating value if there is a reasonable hope and expectation that it will become valuable at some future time, and that such hope and expectation may be foreclosed by the happening of certain events such as the bankruptcy, cessation from doing business, or liquidation of corporation, or the appointment of a receiver for it. Such events are called “identifiable” in that they are likely to be immediately known by everyone having an interest by way of stockholdings or otherwise in the affairs of the corporation; but, regardless of the adjective used to describe them, they are important for tax purposes because they limit or destroy the potential value of stock.
Now normally, capital losses can only offset gains so you can not carry the loss forward....but!
http://www.abanet.org/buslaw/committees/CL690000pub/newsletter/200807/reinstein.pdf
"One key to claiming this type of loss is making sure the taxpayer has contemporaneously documented the key components of the deduction. For example, corporate taxpayers need to document their tax basis in the worthless subsidiary, which typically requires a study under Treas. Reg. Section 1.1502-32 to determine the amount of the deduction. Second, they need to document the worthlessness of the subsidiary. Third, such taxpayers need to
document the gross receipts history of the subsidiary to qualify under Section 165(g)(3) to claim the deduction as ordinary."
Now look at the Nov. 2009 billing statement:
http://www.ghostofwamu.com/documents/08-12229/08-12229-1933.pdf
Mon 10/5/2009 Discussions regarding calculation of state stock basis calculation for purposes of determining the amount of
worthless stock loss to be recognized on the state income tax returns due on October 15.
Moo 10/512009 Design basis study template to show the impact of stock basis for state taxing jurisdictions that do not conform to
U.S. Treasury Income Tax Regulations. Adjust basis model for updated IRS exam adjustments for the 2001
through 2005 exam cycles.
Tues 10/1312009 Gather and draft support documentation to substantiate the IRS exam adjustments included in the stock basis
analyses. Discuss the history of contributions to and distributions from the bank and confirm whether or not each
distribution was a dividend as opposed to retum of capital.
10/1212009Conference call to discuss IRS adjustments for the 2001 through 2006 tax years with respect to the
stock basis study.