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All preferred and common shares are being wiped out and the creditors are only receiving an average of 21 cents on the dollar.
That class action lawsuit only applies to those that purchased Lehman securities between September 13, 2006 and July 30, 2007 and that probably includes a lot of noteholders.
"If you bought Lehman Brothers securities between September 13, 2006 and July 30, 2007, inclusive, you may qualify to serve as Lead Plaintiff. Lead Plaintiff papers must be filed with the court no later than June 30, 2008."
http://www.labaton.com/en/about/press/Lehman-Brothers.cfm
Lehman equity is getting wiped out according to the plan, which was approved yesterday.
If you purchase shares now, you will likely end up getting nothing.
She wouldn't have to if there was a true "global" settlement among all parties.
Preferreds do not have to get 100% in order for commons to see anything...in a settlement.
<"..the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance.">
Unknown facts.....
Pretty much sums up our Confirmation Hearings.
They are still part of the GSA even though there has been no extension. I don't think they can unilaterally talk to the EC until they actually exit the GSA, but it is has been a while since I read the GSA so I may be wrong.
I don't have the link to the recent hearing transcript, but she requested a 30 day extension to the GSA for the mediation during the last hearing(not today's).
I don't see a need for her to ask for extensions to the GSA if she would, "consider the GSA as having been extended if no one withdraws before confirmation".
"The settlement has not been terminated and won't terminate automatically. However, the refusal of the FDIC to consent to an extension means the $7 billion agreement could be terminated at any time by any party, said Rosen, who's with Weil Gotshal & Manges."
http://www.americanbanker.com/syndication/washington-mutual-jpmorgan-fdic-1043865-1.html
I just don't see the judge allowing another "contentious" confirmation hearing unless the GSA has been extended if "the $7 billion agreement could be terminated at any time by any party".
True, she did say not say that she, "would not approve a POR if the GSA were not extended", but if the extension were trivial she would not have requested one.
<So who cares if they never "agree" to an extension?>
The judge cares.
She has asked for an extension each time the GSA has "expired". Although the GSA is still in effect, it is currently non-binding as any party can withdraw at any time. She has made it clear that she will not approve a POR if the GSA is not extended. She did so in Dec. 2010 and most recently for the mediation.
That said, I agree that the FDIC may never withdraw. They could be waiting out the mediation for reasons unknown. Or, they may be waiting for their next board meeting(probably in December although not yet confirmed).
My guess, it is the latter.
The judge was not, "duty bound to release her opinion on the four billion when she arrived at it".
She did not hold "on to it and ask them if they wanted her to release it".
The Debtors(WMI) asked her not to rule on their(WMI) Summary Judgement motion for the $4bil because they were close to a "global" settlement. Judges generally prefer to allow amicable settlements among the parties rather than issue rulings. But, she did say that she was ready to rule and later hinted that it would be in favor of the Debtors.
"who the hell is the Judge and what is her part?"
She is here to adjudicate the bankruptcy case filed at the request of the Debtors(WMI). As I am sure you have noticed, Rosen(WMI) leads the proceedings and sets the agenda. The judge is constrained by bankruptcy law and does not really have liberty to do whatever she wants. That is the way the law is currently written. Yes, it is far from ideal.
"This Judge is worse than the Criminals as she has been aiding and abetting bankruptcy fraud"
That is a fallacious statement.
While I strongly disagree with the judge's reliance on herself basically as an uncrossable witness by entering her own opinions on behalf of the Debtors(still on appeal by EC), we can't forget that we(equity) are primarily here because of her. Back in January 2010 she said we, "have a right to a place at the table". That is currently where we still are, and now, dare I say, we are at the head of the mediation table.
"This is like the guilty criminal who asks the jury not to release their opinion for fear of what a negative opinion would do."
Can't disagree with that lol.
<Because there were settlement words mentioned in the EC's billings, it is no longer non-public info and the Hedgies are allowed to trade in the securities. >
There were settlement words in billings prior to 3-12-2010 as well.
Only those with MNPI know what is going on right now.
It could also mean that H's have to cover contract to FJR difference and will end up with nothing.(which we do know is supposed to happen)
All speculation.
EC Motion for Leave to Cross-Appeal
http://www.kccllc.net/documents/0812229/0812229111011000000000021.pdf
Order Appointing Mediator
Lyons
http://www.kccllc.net/documents/0812229/0812229111011000000000012.pdf
Order Appointing Mediator
Lyons
http://www.kccllc.net/documents/0812229/0812229111011000000000012.pdf
<There was an agreement before, and I now know it was the EC that pulled out,..>
Parker Folse adamantly denied that during the last hearing.
"postponing emergence until after January 1st will increase the size of the usable tax NOL held by the reorganized debtor by several billion dollars. Indeed, the increase in value of this NOL between a confirmation and emergence in December and one in January is so significant that at this point confirmation should be postponed until the new year regardless of any mediation."
Page 5.
http://www.kccllc.net/documents/0812229/0812229111005000000000010.pdf
<Didn't stern just tell her she didn't have jurisdiction?>
Yes, Stern did remove her jurisdiction to adjudicate the claims outside of the "bankruptcy".
Unfortunately, she thinks the SCOTUS ruling doesn't apply if the claims are included in a "settlement". Was that a way for her to neuter the Stern ruling in favor of the BK courts so that they could retain their jurisdiction in light of the ruling? Not sure. Maybe it was a way for her to keep total control of this case and force of a settlement. Who knows?
I am additionally concerned about her inconsistencies(IMO) in her two opinions:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67067936
<If there is cash available to pay the prefs something, but not full face, I believe the EC is first going to have to give the cash to the prefs (and then divvy up the equity in the reorg company between the prefs and the commons in some reasonable manner).>
That is not a bad thing for commons IMO.
Remember, although Rosen has submitted this case as a Ch.11 liquidation, the EC has suggested this should really be a Ch.11 Reorg as evidenced by their billable hours looking into marketing the reorg company.
While it seems most people here are wanting a cash settlement for commons, the available cash is nothing compared to owning a viable reorg with billions in value. Later, we could take advantage of that value in a reverse-merger or by some other means.
If the SNH's and even some of the senior notes wanted shares in the reorg over cash, that should be a clear sign that getting control of the reorg is much better than getting a little cash now.
I would rather have billions later than millions now.
I probably wouldn't go as far as say there are "so many absolutely-detached-from-reality posts here", but I do agree with your conclusions.
Many, if not most, of the posters here have little experience with the US Court system and more specifically the US Bankruptcy Court system. Most Americans believe the US Court system is about justice, fair and "the best system in the world".
While many US Courts(not including Municipal) are about "justice", the US Bankruptcy Courts certainly are not.
There is justifiable frustration in that we can see what is going on in this case and we think JMW should also. Maybe she does, but she has strict rules she must follow. The "Debtors" brought the BK "case" and she is basically here to support them and bring this case to a close.
The Debtors have a GSA which is fair and reasonable(to the Court) primarily because of the $54bil in claims from JPM/FDIC. While we know those claims are frivolous and without merit, the Debtors have not contested them and Judge can't contest the claims for them.
The good thing for us(equity) is that the Debtors and SNH's "plan" cut the case really close in the waterfall so that they could "steal" WMMRC(the reorganized company) which has A LOT of value.
We now have a chance to gain full or near full control of WMMRC and take advantage of $17bil in NOLs and pursue claims against 3rd parties amongst other claims and assets.
We know WMMRC has been GREATLY undervalued by the Debtors and I think that the EC has also great undervalued WMMRC for other reasons.
Barring some great legal miracle from the EC, we won't be getting much from JPM/FDIC to settle. I think we may be able to keep more(maybe all) of the tax refunds but we won't be pursuing JPM/FDIC for the monster claims because those are being settled in the GSA. TPS is still a wildcard, so it is still uncertain if they will be considered equity or paid off.
However, equity is now in a great position. The FJR ruling will allow more money to flow down the waterfall to us.
Equity getting WMMRC would be huge. The judge's ruling about control of the Litigation Trust was also huge. When any class above equity is paid in full, they are pushed out of the Litigation Trust.
I think there is enough value in WMMRC for preferred and commons to see significant value.
<1) Could "H" request to money back from P & K as they are in low ranks of H?
2) Who will be responsible for 30 million expenses per month? Like Starkes said that is H's responsibility. Is the expenses should be allocated and paid as senior notes? If so, it seems the bottom of the waterfall will be damaged, possibly commons.
3) Does disallowance cover all senior bond, subordinated bond, and PIERS from those "Settlement Bondholders"? >
1. No. The estate will pay H's(PIERS) their full claim plus FJR minus any disallowed claims from SNH's including interest for those disallowed claims. If the remaining 35% PIERS have to give up most or even all of their money to Senior Notes per the PIERS subordination agreement, is of no concern to the Estate(WMI).
2. Interest will accrue at FJR and will be paid by WMI. Anything that PIERS owes to Senior Notes will probably continue to accrue at the contract rate-FJR but that will be paid by the PIERS Trust and not by WMI.
3. We don't know yet because the EC has just been granted the right to pursue those claims against SNH's. I think it should.
I agree, and you explain something that I think a lot people haven't quite grasped in this BK.
Without the GSA and POR, equity will never be "in the money" to gain control and stop the POR.
Thanks to the $54bil in FDIC/JPM claims that haven't been challenged or adjudicated, there will never be enough money to cramdown the noteholders to effectuate Equity's "control".
The EC is currently trying to gain control of the reorg debtor(WMMRC), not the current debtor(WMI).
If a claim is disallowed, the interest payable to that claim wouldn't need to be paid.
If the SNH's claims are disallowed, the FJR interest would not be paid on the SNH's claims. The PIERS Trust would not get the interest payable to the SNH's claims, because those claims were disallowed.
The PIERS Trust would be left with 35% retail claims and the FJR interest due to those 35% retail claims. Senior Notes would want all of their interest due from the PIERS Trust, which the 35% retail holders wouldn't be able to cover.
Would/will the 35% retail holders have claims against the SNH's for their inordinate burden to cover Senior Notes?
Maybe, maybe not. I wouldn't want to wait around for the PIERS Trust to first be funded(35%), then have to wait around for litigation against SNH's for a possibility of winning, and then hope SNH's actually pay up.
In summary response to your post I will try to explain my take on PIERS and the possible disallowance.
If SNH's PIERS(65%) claims are disallowed then the estate does not have to pay the PIERS Trust 65% of the PIERS principal and interest. Those funds will flow down the waterfall. The PIERS Trust will only have 35%(retail) funding. Senior notes have a claim on the Trust for the additional contract-FJR interest. I have not read the subordination agreement so I can only speculate when I conclude that Senior Notes can claim their full interest due from the Trust on the 35% retail holders left in the trust. I highly doubt that the 35% retail holders would only have to pay their "fair share" of the interest to the Senior Notes. Yes, retail holders would then suffer from the actions of the SNH's, but that is part of the game since they would have also benefited from the SNH's actions as well.(JMW has already stated this)
If SNH's PIERS claims are disallowed and the estate still has to pay 100% of the PIERS principal and interest to the PIERS Trust, what does that benefit equity?
Why would equity pursue SNH's if the net benefit to equity is nothing?
I believe those assets were transferred to JPM.
From the $10bil in the asset backed securities that they were originally tied to.
"The Indenture Trustee for the PIERS contends that even if the Court equitably disallows the claims of the Settlement Noteholders, the Indenture Trustee as the holder of the claims is still entitled to payment of 100% of those claims.
The Court disagrees."
The Trustee thinks the Trust is entitled to 100% from the estate for PIERS.
The judge disagreed.
If 65% of PIERS are disallowed, and the Trust isn't getting 100%, the plain reading says the Trust will only get 35%.
While retail won't have their shares disallowed, of course, the judge has no compunction for damage done to retail PIERS due to the actions of the SNH's. If SNH's weren't caught, retail would have profited handsomely from the SNH's wrongful actions.
"While the PIERS may receive payment in full of their claims from the Debtors, they may be required to give a part of their distribution to senior creditors. This, however, is simply a result of the terms they accepted when investing in a subordinated note."
Page 98.
JMW lays it out in the bold part of the above quote.
The subordination agreement will be dealt with post-confirmation per JMW.
I don't see the seniors waiving their rights to the interest from PIERS. If anything, I see the seniors litigating that "free money" till the cows come home.
I personally believe the H's are now the riskiest choice. I don't think prefs or commons will see nothing at this point and the "POR 7" showed us that.
However, PIERS now have a chance to end up with nothing.
There is a chance that PIERS end up getting nothing.
"While the PIERS may receive payment in full of their claims from the Debtors, they may be required to give a part of their distribution to senior creditors. This, however, is simply a result of the terms they accepted when investing in a subordinated note."
Page 98.
"The Indenture Trustee for the PIERS contends that even if the Court equitably disallows the claims of the Settlement Noteholders, the Indenture Trustee as the holder of the claims is still entitled to payment of 100% of those claims. The Court disagrees. To the extent the Court disallows those claims, they are disallowed regardless of who holds them."
Page 112.
SNH's combined held roughly 65%(?) of PIERS. The PIERS prospectus requires PIERS to make up the difference between Contract rate and FJR to senior notes. If roughly 65% of PIERS are disallowed, "regardless of who holds them", the estate is not obligated to pay that 65% of PIERS anything, including post-petition interest.
Theoretically, the remaining 35% of PIERS in the trust would be obligated to make up the difference of Contract rate and FJR to the senior note holders. There isn't enough principal and interest to cover that difference by the 35% of PIERS. Since the estate paid the 35% of PIERS in full, PIERS have no option for additional funds through the Litigation Trust.
So, PIERS could end up getting nothing. Although the odds are slim, JMW certainly opened that door in her Opinion.
"At no point did Appaloosa engage in improper conduct during these cases, and in fact, as the bankruptcy judge noted, the efforts of Appaloosa and the other settlement noteholders helped increase the value of the Debtors' estates," the hedge fund said.
Page 71 of the 2nd Opinion:
"Rather, the actions of the Settlement Noteholders appear to
have helped increase the Debtors’ estates."
Changing that one word sure made a difference.
Is it Insider trading efforts....or actions?
Fish, I don't think PIERS are currently as secure as they were pre-2nd Opinion. (Sorry, can't reply to your PM)
We don't yet know what the judge will do in regards to equitable disallowance, and if her opinion gives us any direction, PIERS could be in a bad spot regardless of who holds the claim, ie. new purchasers of H's.
"the upside is over 100%"
The max payout for PIERS is $34 plus FJR. After coughing up the FJR-Contract Rate difference, my rough estimate is max of $20 for Wahuq. That is a great return, but I don't think PIERS will get a share of reorg debtor per the recent Opinion, ie. replacing Litigation Trust board members once that class is paid in full.
I think that while commons will get something, P/K's will get the lion's share of reorg debtor and/or greater percentage return.
From Page 12 of the PIERS prospectus:
http://www.sec.gov/Archives/edgar/data/1143930/000091205701531093/a2058482zs-3a.htm#toc_de1437_1
No payment of principal of (including redemption) or interest on the debentures may be made:
• if any senior indebtedness is not paid when due and any applicable grace period with respect to such default has ended and the default is not cured or waived or has ceased to exist, or
• if the maturity of any senior indebtedness has been accelerated because of a default.
I think the following may be the cause:
Page 83.
"The fact that some of the creditors have contractually agreed to pay their distribution to other creditors does not mean that the Debtors are required to make payments to the senior creditors that are more than the Bankruptcy Code allows, while preserving the subordinated creditors’ claims against the estate. While the Debtors can, through a plan of reorganization, effectuate the subordination agreements by diverting payments from subordinated creditors to senior creditors"
Page 84.
"The WMI Senior Noteholders are entitled under section 726(a)(5) only to the federal judgment rate of interest from the Debtors, the same as all other unsecured creditors. To the extent that this results in them getting more or less than their contract rate of interest, it may be a matter between them and the other creditors who are parties to a subordination agreement"
H's may have to pay Seniors the difference between FJR and contract rate, and at this point not too many people know what the total pay-up amount would be.
SNH's are probably dumping H's as well.
"it all comes down to nabbing JPM, which is getting harder and harder thanks to JMW's opinion."
That is pure speculation at this point. :)
Here is some more speculation:
"the face amount of the Debtors’ NOLs is estimated
to be $17.7 billion for pre-2011 losses"
Page 45.
http://www.kccllc.net/documents/0812229/0812229110913000000000006.pdf
We know the current estimated values of WMMRC are VERY low, and that was intentional by the Debtor's and SNH's. We know the SNH's wanted to "steal" the reorganized debtor for themselves.
Barring a settlement which the EC finds acceptable, we will see more discovery of the SNH's. It is probable that we will see their true values and future value estimates of WMMRC.
There is a lot of value in the reorganized debtor and there certainly is far more value than the "public" realizes.
My previous post was in regards to the Judge's disregard for the application of Stern v Marshall.
Although my first read-through of the opinion was a skim, my initial reaction is this:
The judge's reckless(IMO) opinion, solely based on her disregard for Stern, was another attempt at settlement between all parties. Her first opinion also was an attempt at settlement and she merely continued that position with this opinion.
The EC already submitted an appeal to her first opinion and unless TPS and EC come on board, there will surely be additional appeals.
"The Court’s conclusion in the January 7 Opinion was not a decision on the merits of the underlying claims but merely a determination that the settlement of those claims by the Debtors on the terms of the GSA was reasonable."
Page 14.
http://www.kccllc.net/documents/0812229/0812229110913000000000006.pdf
I am pretty sure her January 7 Opinion did break down each claim and the underlying merits.
From her January 7 Opinion:
"Nonetheless, the Court must consider the reasonableness of the resolution in light of each of the separate claims being resolved or released in the Global Settlement."
Page 20.
http://www.deb.uscourts.gov/Opinions/2011/mfw010711_08-12229.pdf
Yes, the GSA remains intact.
For now.
"Further discovery would help shed light on how the Settlement Noteholders internally treated the settlement discussions and if they considered them material to their trading decisions."
Page 128
http://www.kccllc.net/documents/0812229/0812229110913000000000006.pdf
I wonder what else further discovery would shed light on.
Complicit conduct of the Debtors? JPM and FDIC?