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To all who BELIEVE the 1.88 bln. is final...
...and to all who THINK premium and discount do not mean what they are supposed to mean please have a look at the P&A for "R-G PREMIER BANK OF PUERTO RICO" page 29 (=PDF page 33)
It is also a "Whole Bank" P&A, but the difference to WaMu's P&A is that there are two separate bid values for a deposit premium and an asset premium or discount. In WaMu's P&A it was one single bid amount.
https://www.fdic.gov/bank/individual/failed/r-gpremier-puertorico_P_and_A.pdf
ARTICLE VII
BID; INITIAL PAYMENT
The Assuming Institution has submitted to the Receiver a Deposit premium bid of 1.35% and an Asset premium (discount) bid of (7.89)% (the “Bid Amount”). The Deposit premium bid will be applied to the total of all Assumed Deposits except for brokered, CDARS, and any market place or similar subscription services Deposits. The Asset premium (discount) bid will be applied to the purchase price of all Assets acquired.
[...]
SCHEDULE 3.2 - Purchase Price of Assets or assets
(a) cash and receivables from depository institutions, including cash items in the process of collection, plus interest thereon: Book Value
(b) securities (exclusive of the capital stock of Acquired Subsidiaries, Shared-Loss Securities, FRB and FHLB stock), plus interest thereon: As provided in Section 3.2(b)
(c) federal funds sold and repurchase agreements, if any, including interest thereon: Book Value
(d) Loans: Book Value
(e) credit card business, if any, including all outstanding extensions of credit and offensive litigation, but excluding any class action lawsuits related to the credit card business: Book Value
(f) Safe Deposit Boxes and related business, safekeeping business and trust business, if any: Book Value
(g) Records and other documents: Book Value
(h) Other Real Estate Book Value
(i) boats, motor vehicles, aircraft, trailers, fire arms, repossessed collateral Book Value
(j) capital stock of any Acquired Subsidiaries and FRB and FHLB stock: Book Value
(k) amounts owed to the Failed Bank by any
Acquired Subsidiary: Book Value
(l) amounts owed to the Failed Bank by any Acquired Subsidiary: assets securing Deposits of public money, to the extent not otherwise purchased
Book Value
hereunder:
(m) Overdrafts of customers: Book Value
(n) rights, if any, with respect to Qualified Financial Contracts. As provided in Section 3.2(c)
(o) rights of the Failed Bank to provide mortgage servicing for others and to have mortgage servicing provided to the Failed Bank by others and related contracts. Book Value
(p) Shared-Loss Securities Book Value
assets subject to an option to purchase:
(a) Bank Premises: Fair Market Value
(b) Furniture and Equipment: Fair Market Value
(c) Fixtures: Fair Market Value
(d) Other Equipment: Fair Market Value
WMB fsb was WMI's indirect wholly-owned subsidiary as of the testimony of Doreen Logan...
... and ...
http://sidedraught.com/stocks/WashingtonMutual/WMI_V_JPM_-_APPENDIX_TO_BRIEF_IN_SUPPORT_OF_SJ_MOTION%5B1%5D.pdf
bkshadow, could you please explain what the $52 bln. "Net Investments in Subsidiaries" are exactly related to? It's the last question of this post...
TIA
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115656688
The $40 bln. "Asset-Related Equity Adjustment" on the FDIC balance sheet IMO represents the "net balance" of WMB fsb you mentioned. IMO WMB fsb was sold separately to JPM for book value or JPM still has to pay book value.
The net balance of WMB fsb was approx. $47 bln. BEFORE Project Fillmore
Just a reminder from the P&A:
https://www.fdic.gov/about/freedom/washington_mutual_p_and_a.pdf
"Assets" means all 'assets of the Failed Ban purchased pursuant to Section 3.1.
Assets owned by Subsidiares of the Failed Bank are not "Assets" within the meaning of this definition.
bkshadow, here is another goody!
Please read page 111 and 112 (Chapter Whole Bank) and tell me your opinion about that:
https://books.google.de/books?id=mf6yhRPoFmQC&pg=PA111
I'd also like to hear your opinion to my other posts (for the FDIC bidding process) that proof that the "Bid Amount" is only considered as a "Premium" or "Discount", and that even with a negative bid amount (=discount) the term is always "...for THE PURCHASE of assets" and not "for the assets".
bkshadow, I don't know exactly what the 40 bln. (Asset - Related Equity Adjustment) is, but my WAG is that this number is related to WMB fsb which had a balance sheet of approx. $ 47 bln. according to this letter:
WMB fsb $47 bln.:
http://sidedraught.com/stocks/WashingtonMutual/Project%20Philmore/Project%20Fillmore%20-%20Decapitalization%20of%20WMBfsb.pdf
Even after Project Fillmore it would have had more than $34 billion according to P. Freilinger!!!
You used the term "asset/equity write-off" (only one of the possibilities from Note 8!), the Balance Sheet only says (Asset - Related Equity Adjustments) which could mean WMB fsb is temporarily excluded because it was sold for book value to JPM.
Just a reminder from the P&A:
https://www.fdic.gov/about/freedom/washington_mutual_p_and_a.pdf
"Assets" means all 'assets of the Failed Ban purchased pursuant to Section 3.1.
Assets owned by Subsidiares of the Failed Bank are not "Assets" within the meaning of this definition.
Fannie Mae: Taxpayers Are NOT Capital – Taxpayers Are PROTECTED BY Capital
http://www.valuewalk.com/2015/07/fannie-mae-taxpayers-are-not-capital-taxpayers-are-protected-by-capital/
bkshadow, unfortunately you've highlighted the irrelevant parts
That would be correct:
"Book Value" means, with respect to any Asset and any Liability Assumed, the dollar amount thereof stated on the Accounting Records of the Failed Bank. The Book Value of any item shall be determined as of Bank Closing after adjustments made by the Assuming Bank for normal operational and timing differences in accounts, suspense items, unposted debits and credits, and other similar adjustments or corrections and for setoffs, whether voluntary or involuntary.
Read and digest also this (last post for today)
Read it word by word:
Page 6 (=PDF page 8):
http://www.grantthornton.com/staticfiles/GTCom/Financial%20services/FDIC/Web_What%20you%20need%20to%20know%20about%20FDIC-assisted%20transactions_Feb%202011.pdf
The splitting into deposit premium and asset premium/discount the FDIC introduced later than 2008 and you can find it in newer P&As from 2010 and 2013 I've posted today. But it does not matter, in 2008 it was combined in the single bid amount of 1.88 bln. IMO
The bid consists of two components:
1. Deposit premium – [does not matter for WaMu P&A]
2. Asset premium/discount – an amount over or below the book value of the assets, which adjusts the book value of the assets to the bidder’s estimate of fair value. In most cases, this number is a discount from the book value.
It is important to note that in FDIC-facilitated transactions the acquirer is rarely required to make a payment to the receiver (the FDIC). Rather, successful bidders determine whether the FDIC will make a payment upon closing to the acquirer (if the winning bid is negative) or whether the acquirer will be required to absorb losses through a “first-loss tranche” prior to any losssharing (if the winning bid is positive – meaning the acquirer would normally provide cash consideration to the receiver). The determination of whether the winning bid is positive or negative is based on the deposit premium, asset premium/discount and transactional equity, which represent the net of the acquired assets and assumed liabilities (as computed by the FDIC at closing).
Another tidbit to support my theory is on page 159 and 160 of this book:
Read the complete chapter 2:
https://books.google.de/books?id=YPfwCAAAQBAJ&pg=PA159
Especially the part "At the auction a uniform package is offered..."
Catz, THEN the terms "Premium", "Discount" and "Initial Payment" in conjunction with the "Bid" and "Premium Received" on the FDIC Balance don't make any sense at all!!!
They simply could have used "Purchase Price" in all documents: the Bid Form, the Bid Instructions, the P&A, the FDIC Balance...
Sounds good to me, that are roughly the $25.8 Bln. equity book value from the "WMB Trial Balance Sheet" as of Q3 FY08 (last page)
http://reorgwmi.com/documents/misc/Govinsider_Trial_Balance_Sheets.pdf
how about 32/8
And here the ultimate proof...
...in addition to all the other proofs
...makes perfect sense now
Here are the Bid Instructions for WaMu:
http://wmish.com/docs/gib/WaMuBidInstructions.pdf
The Purchase and Assumption transactions, as more fully described in the Legal Documents, contemplate that the Acquirer will purchase loans and other assets on the books of the Bank as of Bank Closing.
2. Premium or Discount Bids.
A premium is a positive dollar amount paid by the Potential Acquirer to the FDIC for the purchase of assets and/or to assume certain liabilities of the Bank, and a discount is a negative dollar amount to be paid by the FDIC to the Potential Acquirer for the purchase of assets and/or to assume certain liabilities of the Bank. When completing the Bid Form, Potential
The FDIC in its corporate capacity ("Corporation")
[...]
8. Consummation of Transaction.
The Acquirer will be notified through its designated contact person as soon as possible that its bid has been approved by the Corporation. Such notification may be verbal. Upon notification, the Acquirer agrees, as specified in the Bid Form, to execute the appropriate agreement necessary to consummate the transaction(s) selected. Such consummation shall occur at such time and place as the Corporation in its sole discretion determines.
As another poster said, the resolution process can take up to 5 years. For such a big and complex company like WMB with its subs my guess is it could easily take 6,7,8 or even 10 years to finish the resolution process! We don't even know if the P&A agreement really was closed in 09/2014.
I am now quite sure the FDIC will make it right...
Yes, I really appreciate your comments, even if we disagree! Thank you very much...
No, with a negative bid amount they would say Mr. FDIC pay me the difference(!) (the loss!) between book value and current market value of the assets they have to purchase (for book value), which is confirmed by the FDIC links in my previous post.
With a negative bid amount the FDIC has to pay to the acquirer, which compensates his losses for the assets purchased at book value! Sounds logical? Yes!
Did you actually read the docs?!?
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115623523
How can one interpret the following wrong?
From P&A with First Minnesota Bank:
https://www.fdic.gov/bank/individual/failed/1stregents_p_and_a.pdf
"Initial Payment" means the payment made pursuant to Article VII (based on the best information available as of the Bank Closing Date), the amount of which shall be either (i) if the Bid Amount is positive, the aggregate Book Value of the Liabilities Assumed minus the sum of the aggregate purchase price of the Assets as determined pursuant to Section 3.2 and assets purchased (including any Bank Premises purchased via the Bid Form) and the positive Bid Amount, or (ii) if the Bid Amount is negative, the sum of the aggregate Book Value of the Liabilities Assumed and the negative Bid Amount minus the aggregate purchase price of the Assets and assets purchased (including any Bank Premises purchased via the Bid Form).
In fact I've looked at other P&As and the FDIC actually changed the wording to fit "the real meaning" of the "bid amount" and "initial payment":
Here is the P&A with FIRST MINNESOTA BANK 2013 (Whole Bank P&A):
https://www.fdic.gov/bank/individual/failed/1stregents_p_and_a.pdf
From page 6 (=PDF page 9):
From page 32 (=PDF page 35):
The same "imrovement" in the P&A with Great Western Bank P&A 2010 (Whole Bank, all Deposits):
https://www.fdic.gov/bank/individual/failed/tieronebankne_p_and_a.pdf
I think the "Bid" had always that meaning (premium or deposit for the PURCHASE book value) from 1985 to 2008 and up to now...
How do you explain that?
In addition read page 6 (= PDF page 7) last paragraph, beginning with "The volume of assets"! It describes bids for "Whole Bank" transactions, and it clearly explains that the acquirer’s bid reflects their (the acquirer's) valuation of the deposit franchise LESS their estimate of the expected loss on the book value of the assets
IMO the (premium) bid IS only an adjustment/offset for book value, or does anybody come to another conclusion an I'm completely wrong?
https://www.fdic.gov/bank/analytical/cfr/2014/wp2014/WP_2014_04.pdf
Not to the escrows directly, but to the FDIC at first instance. Then the FDIC will distribute those funds. That's all covered by the resolution process IMO...
Great DD! So JPM has to pay for the rest at book/market value to escrow?
Titantic Shifts On All Fronts: Pressure Mounts As End Nears./ Love The Way You Lie
http://timhoward717.com/2015/07/23/titantic-shifts-on-all-fronts-pressure-mounts-as-end-nears-love-the-way-you-lie/
bkshadow, EXDIMER, WithCatz I'd appreciate your input to this post and my previous ones...
Am I completely off beam???
$1.88 bln. only for adjustment and franchise value!
Yes, the bid amount of $1.88 bln. was considered as premium. This premium bid value (or discount if negative) is only an up- (oder down-) adjustment (I called it "offset" yesterday) for the book value of equity (of the failed bank) to (fair) market value (date of resolution) and also includes the "franchise value" (the brand, the business network/connections and so on... link to its definition below!) of the failed bank according to the following 2 docs.
Both from same author and almost the same content, but I think the first one is from 2008 and the second one is a rework. Better read the older one up to page 20! It perfectly explains the cost calculation for the FDIC, what the "premium" bid means and much more!
Also search for "franchise value" within the docs!
Thanks to Jestiron for this one (be careful, quotation is not allowed according to the first page) from 2008:
https://www.fdic.gov/bank/analytical/cfr/2008/oct/CFR_SS_2008_Bennett.pdf
And thanks to investorhub123 for this one (IMO reworked 2008 version from 2014):
https://www.fdic.gov/bank/analytical/cfr/2014/wp2014/WP_2014_04.pdf
Also read his post:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115621223
Definition of franchise value:
http://beginnersinvest.about.com/cs/investing101/a/111102a.htm
BTW, that also leads me to the conclusion that the shares in the NEWCO were only the "icing on the cake" we received for the IT allegations against AAOC and has nothing to do with the resolution process of the FDIC (which still has NOT finished yet IMO).
JPM must pay book value - another proof and crystal clear now
Look at my 3 previous posts here...
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115592609
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115593026
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115593431
...and then when you know what a "purchase premium" is look at page 4 of JPM's original bid form:
Source: http://sidedraught.com/stocks/WashingtonMutual/JPMorgan%2520Chase,%2520N.A.%2520Bid,%2520September%252024,%25202008%2520(19%2520pages).pdf
Must be read as "a positive dollar amount paid by the acquirer...FOR THE PURCHASE of assets..."
It is as clear as day that the $1.88 bln. bid amount is only a premium FOR THE (IMO following) PURCHASE of assets and not FOR the assets THEMSELVES because it also states the same for a discount (negative bid amount) and THAT wouldn't make any sense at all!!! Even with a negative bid amount (the FDIC has to pay to the acquirer) the acquirer has to PURCHASE assets (IMO for book/market value as in Section 3.2 of the P&A):
A discount is a negative dollar amount to be paid by the FDIC to the acquirer for the purchase of assets and to assume certain liabilties of the Institution.
And that's why the term "Premiums Received at Resolution" (and NOT Purchase Price Received at Resolution) is at the FDIC Balance Sheet
Read my other post first, it is important: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=115592609
http://wmish.com/docs/FDIC/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf
And here a second example:
PDF page 11: http://www.frbsf.org/economic-research/files/84-2_16-30.pdf
The winning bidder acquires the bank (at book/market value according to Schedule 3.2 IMO), and pays a preimium for it (which is the bid amount IMO, the $1.88 bln.)
JPM still HAS to pay book value IMO, proof...
It is from 1985 but I think it explains exactly what the bid price of $1.88 bln. means. It was only a purchase premium! Not a purchase price, but a purchase premium. Thast's why JPM has chosen that number (year of WaMus foundation), they could also have chosen 2 bln. or 3 bln. because it didn't really matter because they knew they have/had to purchase the assets from "Schedule 3.2" separately at book value/market value and won't get all Assets (upper case!) according to the P&A, and have to pay for it!
Source (it is worth to read the whole document): https://research.stlouisfed.org/publications/review/85/06/Recent_Jun_Jul1985.pdf?q=penn-square-bank-na
JPM did NOT get everything for $1.88 bln. IMO
The FDIC had to accept the bid because it was less expensive for them in comparaison to a deposit payoff.
Did this still apply in 2008? Any opinions?
To determine the book value a good starting point would be the Trial Balance Sheet (WASHINGTON MUTUAL BANK CONS FKA WMBFA) Quarter 3 FY08 found/posted by Govinsider last year...
Nothing should be more up to date regarding "book value" than this piece from Q3 2008 IMO!
Be patient, it could take up to three minutes to load:
http://reorgwmi.com/documents/misc/Govinsider_Trial_Balance_Sheets.pdf
I really appreciate your DD, thanks!
OTC at its best!
Chart: Three Advancing White Soldiers (3rd time)
The last two times we had this pattern the PPS increased significantly afterwards (green circles). This time, we have a higher base level and much more volume than the last two times!
RSI and MACD bullish, Accum/Dist at new all-time high!
Chart courtesy of StockCharts.com
--------------------------------------
Only my opinion, no investment advice!
--------------------------------------
The 15 minute chart is looking very promising
http://www.barchart.com/chart.php?sym=FNMA&style=technical&template=&p=I&d=M&im=15&sd=07%2F01%2F2015&ed=07%2F20%2F2015&size=L&log=0&t=CANDLE&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=07%2F20%2F2015#jump
JB, with "higher lows every time" I referred to the beautiful long-term up trend here: http://schrts.co/oFSTHa
1.2 mln. shares so far, no normal WMIH day, expecting news soon. Too much volume for MM games IMO
Level 2: http://cdn1.boardpost.net/quote.php
As long as we have higher lows every time they can play the game as often as they want
Many 100k trades, more than 800k total volume so far
2 x 100k trades, not that bad
http://cdn1.boardpost.net/quote.php