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Thanks, claw. If we make it out of this in one piece, the beer's on me.
I absolutely do not expect anyone to cover my risk or my losses (a noteworthy statement, given that I live in the People's Republic of California, where that is the prevailing attitude.)
Thank you for bringing much-needed calm and reason to this board. Your posts are always much appreciated... though I think you are spinning your wheels with Voo.
Take care,
Jack
Count me among your "fools" - though at the time I bought U's, there was no way to know that corruption would prevail. The U's, while riskier, presented the potential for massive upside.
Now, I was not so foolish as to not buy P's as a safer bet... though, in hindsight, I wish that's all I had bought.
That said, here I am with the option of voting NO with my P's (and potentially wiping out my U's), or Yes with my P's (to hopefully preserve my U's).
Not enough info at the present moment to make that decision, as it is potentially a very costly one.
I hope the hearing Wednesday helps to clear things up.
Jack
Also, recall that the SNH's at one point thought equity was completely out of the money and they may have dumped a lot of their shares right after the GSA was announced. Not so certain they have that many shares left; that is one reason why they were concerned about the IT charges.
I can't be certain of that, either, but I am inclined to believe they did.
Here's why: it was Equity that posed the threat to them via litigation of IT. It was Equity that they needed to appease in the settlement, IMO.
The EC has given the judge the ultimate say in the matter, since, as you have eloquently pointed out, the commons have not gotten "consent" of the prefs, other than those on the EC.
However, if the SNH's hold a huge block of prefs, and if they vote YES, it won't take many of us Regular Joes voting Yes to push it through.
IMO
Which is why I've been asking how many preferreds the SNH's own.
They presumably support the 70/30 split as part of their settlement with EC, and I think will be voting YES to the plan and releases.
If they have a substantial block of shares, and enough of the remaining prefs vote Yes, the split may hold at 70/30.
I am reminded of the expression "A fool and his money are soon parted."
I'll add a third unknown: to what extent DIME dilutes U's.
Myadad (or anyone) - do you know what percentage of the other preferred classes that the SNH's own? Thanks.
Do we know how many Preferred's the SNH's own? I would presume that, as part of this settlement, they agreed to vote YES to the 70/30 split.
Do they own enough pref's to get the plan passed "as is", without modification from Walrath?
(My apologies if this was discussed already - I didn't find anything in a search of the board.)
Jack
Question re 70/30 split: If two of the three EC members hold preferred (one of them preseizure), why did the EC propose a 70/30 split?
Willingham, who only owns U's, comprises only one vote, so at least one of the P holders had to agree, as they needed a majority.
Thoughts?
Sorry, jhd, I just don't see how the whole deal would be at risk with a NO vote. If U's are unhappy because JMW decides to "strictly" follow APR, well there's not much they can do about it.
The EC "proposed" a 70/30 split, but it concedes that JMW may change it. We just don't know yet - but, as claw has pointed out - she almost certainly will change it if P's vote NO.
Exactly what I'm thinking. If that's the case, I'll vote no.
Thanks, claw. I will do just that.
Could you refresh me on the projected share conversion of U's and P's? It's 18 P's for every Newco share, correct? And the U/Newco conversion?...
And do we know the impact of DIME on U's yet? If the dilution is massive, it might make sense to vote no.
Thanks.
Likewise, if one's holding are weighted to U's (dollarwise), then voting their P's "Yes" to the plan and "Yes" to releases makes sense, as well, no?
And getting less rare... I am leaning that way, as well.
Thanks Catz. This is the first good news I've seen on the boards in a long time. Having someone with his brain and integrity will be an asset moving forward for the company.
Any chance the good judge could be added to the BOD?
Amen. Well said. I concur.
You provide hope, Uz. Thanks for these reminders.
I pray the EC has a merger lined up immediately upon emergence.
I find myself doing that a lot these days - praying.
Jack
This provision is troublesome. Why did the EC permit its inclusion into the POR? You'd think the EC Chairman, who holds only commons, would not put his shares at risk like this.
GPG: Your quote here sums it up well
So unless we have a potential suitor/merger in the wings or have one emerge shortly after exiting BK, we run the risk of getting nothing. I, for one, am not happy with that possibility, particularly when we would have likely gotten billions from pursuing IT.
chaarles, you wrote:
All EC members in the BOD will be working to maximize the value of reorg WMI.
Don: I agree with you, partially. Yes, someone has to sit on the board, and yes, I'm glad we have a majority.
And since you applied for the job, you are perhaps the best to ask this: would you feel right about taking $300K/year (plus a percentage of litigation proceeds) while the rest of equity is diluted and trades sideways (for who knows how long)?
Would you not think it more fair to tie your BOD comp to performance? Perhaps a nominal stipend and a per meeting fee?
I am not arguing that MW should not be paid - I am arguing HOW MUCH he should be paid. This is a critically important distinction. Anyway you slice it, $300K/year is a meal ticket. It is more than most shareholders make every year, and reeks of conflict of interest.
(My numbers are an assumption, based on MW's comp from the Mirant BK - his comp on our board could be higher or lower.)
Jack
P.S. I have no doubt you would been a much more ethical choice for EC. Had you been chosen, we would not be debating this issue on the boards right now.
I have no problem with board members getting paid... and I don't know what MW is set to get to be on our new board... but if he gets what he got from Mirant, I think it's excessive.
If he were to get paid his Mirant "rate", he'd make $265K/year MINIMUM. Add in his per meeting charges and a percent of litigation proceeds, and he could make a bundle.
With that in mind, one can see how it's possible that MW's resolve to hold our for an optimum settlement may have been comprimised.
We decry politicians that take posh jobs and/or board seats with companies to whom they gave lucrative contracts while in office - especially when those contracts are to the detriment of the majority of the politician's constituents.
This is no different.
Until recently, I implicitly trusted MW. I believed that, because he owned a million commons that cost him $200K, that his interests were aligned with maximizing the value of those shares.
Now, I wonder if he could give a rat's a$$ about his shares.
I posted before that any settlement should reflect both the SNH's and The EC's chances of victory at litigation. Given that Walrath said the IT claims were "colorable", the SNH's should have felt heat sufficient enough to give up 1/2+ of their claims.
Did we get at least that much value in this settlement? Perhaps I'm missing something, but I just don't see it.
I want full disclosure into what Willie is planning to gain from his board seat. He owes his constituents at least that much.
If not, I want him off the EC to await his share-price appreciation like the rest of us.
This section of that document is remarkable:
6. After the Court approved a plan in Mirant, Willingham was appointed as the equity
committee’s representative on the board of Mirant Corporation Asset Recovery, LLC (MCAR).
For serving on the board, the MCAR pays him:
a. $25,000 per annum;
b. $1,500 a board meeting;
c. $20,000 a month; and
d. Up to one percent of litigation proceeds.
Willingham Deposition, 19:11-21. The MCAR provided between one quarter and one third of
Willingham’s 2008 income. Willingham Deposition, 20:9-15.
Many thanks, marayatano. That explanation is very helpful, and is very encouraging. The more skin the HF's have in the game, the better for us.
Mara: please excuse my ignorance. I understand the 5% is in the POR, correct? Where do the other numbers come from (the 20% and unlimited amounts that you cite for other classes)?
Thanks.
Jack
If Willingham can facilitate such an auction, he'll be worth whatever he gets for being on the board.
Speaking of which... everyone is so quick to jump on Willingham for whatever compensation he gets for his board seat. Let's not forget the jokers that preceded him on the board that took good money to DESTROY the company.
I'd say money to MW to help increase value is money well spent.
IMO
Bopfan started an interesting discussion over at Y...
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_W/threadview?m=te&bn=86316&tid=896496&mid=896496&tof=14&frt=2#896496
Much faster just posted about the bizarre disparities among WMI equity issues. For his example, he uses the widely different amounts of newco stock that can be obtained by a $1,000 investment today in Ps, Ks, or Qs. Much has no explanation for this anomaly.
It appears to me that the market is shrugging off the plan for some reason, because despite the long awaited consensual agreement -- the true global settlement -- the market continues to do business as usual, disregarding the forecasts predicted in the plan.
My explanation is the market doesn't believe things will be ultimately resolved as described in the plan. The only thing that's changed between Monday and Tuesday is that it is now official that (1) equity will own the newco and its attendant tax benefits, and (2) the newco unquestionably owns $17.7B in NOLs.
I said yesterday that I think the market believes that players will want a piece of the WMI action and will make offers to MW and the EC that will result in a radically different plan than POR7.
It would be very easy for a deep pocket player (e.g., a bank) to re-age WMI's debt AND the $7.5B in preferreds. With the FJR in place the debt service can't be more than $200MM per year. Reinstating dividends on the preferreds would be about $500MM per year (I don't know if the Ks and TPS are owed past dividends; if they are they could be on the table, too, and if Ks and TPS get past dividends Ps would, too). That's $700MM to obtain $7B in cash and $17.7B in NOLs.
That leaves the commons as owners of the newco. Assuming arguendo that the merger partner/acquirer's tax mavens find a way around 382, then the commons would be drastically revalued as either shares in the acquiring/merging entity or joint venture.
We do know one thing about financial players, and that is that they are always looking for new profit opportunities. An entity with $7B cash and $17.7B in tax benefits doesn't become available every day. To believe that Wall Street would not take notice of such an entity is not credible. Players are trying to figure out how they can make WMI work for them, and I think the market thinks so, too.
There could be other explanations for the current prices, but this one seems the most plausible.
CWG: Thank you for this. For me, this says it all - suggests strongly that equity is going to be fine, in the long run.
ROSEN: And what percentage of the stock will be received by the PIERS?
GOULDING: Approximately seventy-seven percent.
ROSEN: In the event that -- well, why would somebody have chosen stock and not cash, especially if it looks like, based upon the waterfall, that cash is going to come to a higher level in the classes?
GOULDING: You would elect to take stock in lieu of cash if you believe that the company was undervalued.
So you believe that making a swap of a dollar of cash for a dollar of stock was a good trade.
So people who elected stock believe that they had -- it had more value than the value Blackstone was placing on it.
Great post. I agree with everything said you said here.
One other thought: quotes from Sargent and Willingham have reflected that the EC is "pleased" with the settlement... That's quite different than saying the EC is "satisfied" with the result...
That suggests to me that there is more to this settlement than meets the eye right now... and I suspect the EC knows of an interested white night or has one lined up, ready to go...
It's subtle, but I think the verbiage may be significant.
Jack
One other thought: quotes from Sargent and Willingham have reflected that the EC is "pleased" with the settlement... That's quite different than saying the EC is "satisfied" with the result...
That suggests to me that there is more to this settlement than meets the eye right now... and I suspect the EC knows of an interested white night or has one lined up, ready to go...
It's subtle, but I think the verbiage may be significant.
Jack
I agree. There's no way this case, and the huge NOL dollars involved, goes unnoticed by others with pockets much deeper than ours.
Buffet is brilliant at seizing opportunities like the one that the reorg company will present... I expect a deal with someone soon after emergence from BK...
Jack
Don: How long do you think it will take to build "real value", and what you define as "real value"?
Thanks!
Jack
Bopfan speaks:
The Morning After 3 minutes ago
My first thought was how well JPM and the FDIC played their hands. They elected to stand behind the protection of the court's rulings on the GSA, hold on to the tax refunds, and stare down the EC. My guess is the EC had to blink and capitulated even to giving up the appeals.
JPM has relinquished the BOLI/COLI but my suspicion is that they will be apportioned in the same manner as the tax refunds: to wit, to the extent created by WMB employees, JPM will have liquidated those policies; the ones covering WMI employees would go to WMI. WMB had more employees, but WMI the most senior ones.
As the architects of the seizure and the owners of the deepest pockets, they were equity's best hope of actual cash dollars for its new enterprise.
On the brighter side, I am thinking that there is a hint of the new company's true value in the apportionment of its stock. If the company were worth say $10B, then the preferreds would receive par over time, and commons slightly less than $2 per share.
All this presupposes, of course, that there is a business that can generate returns of that magnitude. I expect the EC has candidates lined up for that purpose, or candidates will present themselves to the EC now that all is known. The latter seems to me the best possibility for meaningful use of the tax benefits. Now that all is known suitors (most likely some who have been watching the case) will hopefully arrive over the next few weeks.
This plan brings home the extraordinary harm Weil Gotshal and Quinn Emmanuel did to WMI shareholders. Their destruction was so complete that JPM and the FDIC did not even have to forfeit the tax refunds which JPM arguably cannot legally obtain.
Business people abhor a vacuum, so someone (probably several) has eyes on the tax benefits, the only asset JPM couldn't steal. In the coming weeks we'll get an idea of just how much they can mitigate WMI's losses.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_W/threadview?m=te&bn=86316&tid=892431&mid=892431&tof=5&frt=2#892431
I don't know why you fail to grasp what I said, or didn't say... I never said DOJ would prosecute the SNHs for CRIMINAL IT... (please take note of the use of the word "criminal", not "civil")
I said that ONLY the DOJ can make that determination. The EC is powerless to bargain that away, i.e., they have no say in any CRIMINAL charges that may or may not come in the future.
Please digest these words - I can't make them any simpler. And please stop mincing my words.
I'm done discussing this. If you can't comprehend it, then oh well...
Duly noted, and a fair statement.
Survival is good and all that... but I can't help but wonder: where the hell is at least half of the SNHs value here? That's what mediation should have yielded: half of what was at stake for them (thereabouts, depending on the strength of the case against them and their motivation to settle, multiplied by the risk of losing at trial).
Are we $1.25B+ any better off today?
Claw: what do you expect the PPS to be in March? Thanks.