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Yes. It is in Judge Walrath's Court.
Peck, Gross or Walsh all would have ended this by now.
LTW Post-Trial Timeline:
October 14, 2011 - LTW Plaintiffs Post Trial Briefs Due
October 28, 2011 - Debtors Response to LTW Plaintiffs Brief
November 11, 2011 - LTW Plaintiffs Reply to Debtors response
November 23, 2011 - Oral Closing arguments (1 hour each side)
Final Order - TBD
That Trustee Services site is a complete waste of estate resources. The court docket is several weeks behind. Best to follow along using PACER.
I don't remember for certain whether Levine testified on this issue while on the stand but this concept was addressed in several places within his expert report and the point has been made in a number of the LTW Plaintiffs bankruptcy papers. Without regard to whether Levine addressed it in his direct testimony, it is fair game for Steinberg and Hochman to address in their post-closing brief. Whatever the legal team feels are the most salient arguments will be the ones that ultimately end up in their post-closing brief because the parties agreed to limit their submissions to a certain number of pages so the arguments have to be succinct. By the time the Judge gets to read 3 rounds of written submissions she will have likely forgotten what was said on the stand if those points are not addressed in the written submissions.
As far as the "stock warrant" issue goes, to me it matters not what they are called because it is the economic substance (supported by the contract itself) that should prevail. It is also my opinion that when filtered through FASB 150 (now codified in various sections of ASC 480), the LTWs come out on the otherside first as an "obligation" and ultimately a "liability".
The scope of FASB 150 includes securities like the Dime LTWs and specifically requires certain instruments to be recognized as liabilities, including the following:
"A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares, if, at inception, the monetary value of the obligation is based solely or predominantly on any of the following:
a) A fixed monetary amount known at inception, for example, a payable settleable with a variable number of the issuer’s equity shares
b) Variations in something other than the fair value of the issuer’s equity shares, for example,a financial instrument indexed to the S&P 500 and settleable with a variable number of the issuer’s equity shares
c) Variations inversely related to changes in the fair value of the issuer’s equity shares, forexample, a written put option that could be net share settled."
To me the FASB 150 argument is a winner in the battle of liability vs equity and this was addressed at the trial. FASB 150 not only clarified the term "obligation" but also amended the definition of "liability" as that term had previously been defined under Statements of Financial Accounting Concepts #6.
It is notable that Dr. Chamberlain cited the definition of "liability" from SFAC 6 in her expert report (a non authoritative definition as it has been superseded) while our expert witness properly cited to the most authoritative source, that being the now codified version of FASB 150.
This isn't the first time (in fact it isn't even the second time) in the LTW Adversary Proceeding that the Debtors have cited to a non-authoritative source or document because they were trying to hoodwink the court by slipping in a non-final version of the GSB Warrant Agreement back during the first confirmation hearing. Now they are once again trying the same tactics by citing to old accounting definitions while also trying to get this erstwhile 2002 Agreement slipped in even though apparently only one copy exists anywhere on the face of the planet even at that they can't find the real signature page and even more curious is that it was never filed with the SEC.
I'm looking forward to seeing that first post-closing brief.
GLTA
Hochman addresed many of the discrepancies and inconsistencies at the trial last week so I am certain they are aware. Steinberg and Hochman are always thinking two steps ahead.
Chamberlain: Factors Affecting the Value of the LTWs
In her November 2010 Declaration, Dr. Chamberlain opined:
“For both the GSBNZs and the DIMEZs, and in direct contrast to the three cash based securities discussed above (CALGZ, CALGL, and CCPRZ), two variables affected the value of the securities, not just one: (1) the proceeds from any litigation recovery; and (2) the parent company’s own share price. That is, the economic and financial factors that affected the economic or financial condition of Dime or GSB also affected the share price of that company’s litigation tracking warrants.” (See Chamberlain Declaration at ¶39)
Here are some of the statements that Dr. Chamberlain made in her analyst reports back in the 1990’s when she covered the LTWs for Jefferies that contradict her own bald assertion:
From the Jefferies 03/02/1998 GSB report:
The market value of the LTW’s is currently $6 per share (Table 2) but could ultimately be worth as much as $9-$10 depending on the size of the ultimate award (possibly including interest) and the taxability of proceeds. They could also be worth nothing. While the latter outcome is unlikely, the ultimate value and the timing of any LTW pay out is in the hands of the courts, not the market. But the spin off is likely to boost GSB’s price as was the case for the original CalFed litigation certificates (CALGZ- $21, NR) and the Coast Federal certificates (CCPRZ- $15 1/4, NR). Based on these shares performance we think the LTW’s could trade up quickly to $8. (Page 1, ¶ 2)
Not only is she failing to suggest that the value of the to-be-spun-off GSB LTWs would somehow be correlated to the stock price of the Bank after the then-forthcoming decoupling, she actually infers that the decoupling of the litigation assets from the bank in the form of LTWs will INCREASE the price of the LTWs (GSBNZ) as it apparently did for other previously spun off goodwill litigation securities.
From the Jefferies 12/14/1998 LTW Panel Report:
"Buyers for the Rumors and the News. All four goodwill litigation securities should trade up on a favorable decision from Judge Smith. Why? Simply put, strong upside potential on price with little correlation to the overall market. Assuming Glendale receives their maximum $2.0 billion, and the appellate process takes two years, GSBNZs should pay out about $11.59 per share in stock of GSB, or its successor, for a 54% annualized return. That’s attractive both in absolute and relative terms especially for investors expecting the stock market underperformance in 1999 and 2000 relative to the past three years."
The inclusion of the statement “with little correlation to the overall market” is obviously good for DIMEQ holders because it shows that when Dr. Chamberlain was an analyst she saw little, if any “correlation” between the overall market and the price of the LTWs yet when she sat on the witness stand she testified at length regarding the “correlation” she suddenly draws now that she is being paid to do so. The inclusion of the “or its successor” language suggests that Dr. Chamberlain assumed that in the event of the sale of the bank or some other type of combination that Golden State Bank would actually honor Section 4.2 of the GSB warrant agreement (which is substantially similar to Section 4.2 of the Dime LTW Agreement). In her 20+ analyst reports covering LTWs and LPCs, Dr. Chamberlain never warned investors that GSB or its Board could, on a whim, decide not to honor the agreement (whether a combination occurred or not) and simply transfer the litigation assets to a successor free and clear of any obligations to the GSBNZ LTW holders.
So the question one might reasonably ask is whether she was less than forthcoming with the market by withholding such important information when she issued her analyst reports in order to peddle LTWs as a market maker or is she less than forthcoming with the court now in order to peddle her bought and paid for opinion as an expert witness in exchange for an administrative claim for untold billing hours tolling at $600 per hour. Certainly the fact that she personally traded in the LTWs and LPCs (which she testified to) while covering these securities for Jefferies as an analyst wouldn't have had any bearing on her previous opinion just as the fact that she tells a different story now isn't impacted by her being paid to do so.
The fate that WMI seeks to impose upon Dime LTW holders was obviously not a risk that the markets ever perceived. These risks and correlations that Dr. Chamberlain is so sure of today, were somehow always missing not only from her tabular calculations of present value and terminal value but are also missing in her narrative descriptions of value drivers and events. She never once presented a valuation of any LTWs or LPCs where any single line item in a tabular calculation or any narrative discussion mentions the financial position or results of operations of the Banks or the holding companies as being correlated with the “per warrant” value. And she is, to her own knowledge and by her own testimony, the only analyst that covered these LTW and LPC securities.
Color me confused as to what Dr. Chamberlain's real opinion on market correlation actually is because it appears to change based on who is cutting her checks...
Anchor Litigation Asset "Horse Trading" Timeline
Professor Steinberg began going down this road at the first confirmation hearing but just kept getting stonewalled with witnesses that couldn’t seem to remember anything while on the stand. He followed up on this line of questioning today. To say that Goulding, Kosturos et. al couldn’t remember anything (now or in the past) about how or why the Goodwill Litigation was divvied up is quite convenient and perhaps disingenuous given the level of detail in the timeline below. In going back and listening to the old audio archives it was amusing to listen to Goulding and Kosturos play “Hot Potato” with respect to the settlement negotiations and other discussions (or lack thereof) regarding the LTWs. Goulding was previously asked questions along this front and he basically said "You’ll have to talk to Bill (Kosturos), he handled all of that” and then Kosturos would in turn say “Jonathan was the one handling that”. When all else fails, they just resorted to attorney client privilege, “you’re asking me to draw a legal conclusion”, “it was a holistic approach” or the newest one introduced by Chamberlain which was “Totality”.
Now to the timeline. Based upon a reading of the EC’s Post Hearing Brief [D.E. #8492], it is abundantly clear that the Goodwill Litigation was a key component and a great source of contention in the settlement negotiations as outlined below (outlining only the portion related to the Goodwill Litigation). Keep in mind that until the March 4, 2010, the public was unaware of how the Goodwill Litigation assets were to be treated:
o March 13, 2009: WMI submits settlement proposal to JPMC, all Goodwill Litigation Assets were to go 100% to WMI;
o March 18, 2009: JPMC responds with a proposal that it retain all Goodwill Litigation Assets except for $15 million (no further details provided);
o April 16, 2009: WMI responds by proposing that WMI should receive the proceeds of the American Saving litigation and JPMC would receive the first $55 million from the Anchor Litigation and splitting all additional proceeds 50/50;
o April 26, 2009: JPMC responds and offers no change from its March 18, 2009 proposal with respect to the Goodwill Litigation;
o July 29, 2009: Appaloosa & Centerbridge meet with JPMC and make further counterproposals to JPMC including that WMI receive all of the American Savings goodwill litigation and that JPMC receive the Anchor Savings goodwill litigation;
This is the first time that the Anchor Litigation goes exclusively to JPMC and curiously it occurs when the SNHs and JPMC negotiate without WMI present.
o August 18, 2009: by email, JPMC agrees to the proposal that WMI receive all of the American Savings goodwill litigation and that JPMC receive the Anchor Savings goodwill litigation;
o In mid-September 2009, Appaloosa and Centerbridge and their counsel met with Mr. Kosturos and informed him of the offer they had made to JPMC and of JPMC’s counteroffer;
o November 20, 2009,: Kosturos, WMI’s CRO sends a draft proposal to Centerbridge and Appaloosa to later send to JPMC. With respect to the Goodwill Litigation, it proposed that 100% of American Savings proceeds be allocated to WMI and that 100% of Anchor Savings proceeds go to JPMC.
o November 23, 2009: the SNHs attended another meeting with the Debtors at Weil for the purpose of formulating a further settlement proposal to JPMC; at that meeting, they received a draft of a further settlement offer that the Debtors proposed to give JPMC. (Tr. 7/18 at 106) It was identical to the one that Kosturos had sent Appaloosa and Centerbridge on November 20 with respect to the Goodwill litigation;
o November 30, 2009: JPMC responded proposing that the American Savings goodwill litigation proceeds be conveyed to itself;
o December 8, 2009: WMI responds by insisting that it take the American Savings piece and JPMC taking the Anchor Savings piece;
o The SNHs’ involvement in the settlement process during December 2009 didn’t end with the Debtors’ transmission of their December 8 proposal to JPMC. On December 11, Kosturos e-mailed JPMC’s Don McCree and stated as follows:
“I spoke to my major creditors and they are unwilling at this point to give up the VISA shares and the American Savings litigation. Their agreement to proceed with my previous offer was based on keeping those assets and they feel that if they give them up WMI will not have the votes to confirm a Plan of Reorganization. I will continue to talk to them this weekend, but I’m not confident that I will be able to sway them from their positions.”
At a minimum, this e-mail suggests that Kosturos and McCree had discussed the SNH/Debtors’ proposal of December 8, that JPMC had pushed back on the ownership of Visa shares and American Savings Goodwill litigation, but that the Debtors’ proposed split of the Tax Refunds had not been controversial.
o January 12, 2010: JPMC accepted the Debtors’ proposal for splitting the Goodwill Litigation as WMI proposed on December 8, 2009;
o March 4, 2010: Brian Rosen announces the Global Settlement Agreement publicly in court which provided that 100% of American Savings proceeds be allocated to WMI and that 100% of Anchor Savings proceeds go to JPMC.
o The rest is history…
The question here is why would the SNHs (and the Debtors who now exist only to do their bidding and apparently have no thoughts or direction of their own due to the blocking positions held by the SNHs) be so adamant about keeping the American Savings litigation while being so willing to transfer away a much larger (larger by 5x or more) litigation asset in the form of Anchor? The answer is because they knew that ultimately only 15% of Anchor actually belonged to the estate and that if they kept the Anchor Litigation asset inside WMI’s estate, they would have a much more difficult time expunging the obligation owed to the LTW holders. It was much easier and much more profitable to breach an ambiguous contract either by overt action or oversight and transfer away something that belongs to someone else.
The level of disenfranchisement that LTW Holders have endured throughout these Chapter 11 Cases at the hands of the Debtors and the Board of Directors can only be described as “extraordinary”. More “extraordinary” yet are the windfall profits (approximately $337 million) that would improperly inure to the benefit of the other Creditors of the Estate if the Court allows the Debtors to expunge the claims of the LTW Holders. The above referenced windfall profits that would be delivered by the Debtors to the clients of the Unsecured Creditors Committee arise because of an impermissible “Double Dip” that results first from the Debtor having improperly transferred (for valuable consideration received in return), to JP Morgan Chase, the proceeds of the underlying Anchor Litigation, “Free and Clear” of the underlying obligations (liens, claims and encumbrances) owed to LTW Holders. Making this back-dated transfer via section 363 sale results in a benefit to the Debtors’ Estates and the Unsecured Creditors Committee’s clients in the amount of $337 million which was recognized by the Court as the proper amount at which to establish the Disputed Claims Reserve. The second leg of this "Double Dip” results from the cancellation of the underlying obligation that is owed to LTW Holders. This leg of the transaction completes the $337 million “windfall” to the Debtors Estates and the Unsecured Creditors Committee’s clients.
Stated another way, when the Debtors transferred the proceeds of the Anchor Litigation (an asset belonging 85% to LTW Holders and 15% to WMI) to a 3rd party, it transferred, for value, an 85% stake in an asset it did not own. When it went a step further and also attempted to expunge the underlying obligation to the LTW Holders it impermissibly created value for the Estates’ other Creditors out of thin air. All told, $337 million in value would be created by the Debtor for the benefit of the Unsecured Creditors Committee’s other clients (besides the LTW holders they refuse to recognize) by selling an asset that did not belong to them and then refusing to honor a liability that is, in fact, theirs to honor because of the contractual provisions of the Warrant Agreement that (1) preserve the essential intent and principles of the agreement and (2) protect the rights and claims of the LTW holders.
There isn't anything fishy going on. For the purposes of determining the number of shares of CHMT to distribute, the value of CHMT is fixed at $13.45 per share. So on that front, the current trading price of CHMT is irrelevant. However, the current trading price of CHMT can have a dramatic impact on your account balance. Case in point, whether CHMT trades at $10 or $18 will impact upon the economic value of the distribution. Under the POR, the value of the reorganized CHMT was set at $13.45 so that is what they use to determine how many shares to distribute.
Back in May 2011 I stated:
"I show that, based on the remaining funds within the various pools, the max distribution we could see going forward would be about $0.24 per share based on a CHMT share price of $13.45 as defined by the POR."
Obviously that statement reflects a best case scenario but it was viewed in terms of if we got all of the remaining funds and that is not likely. The actual total per share distribution will be dependent on how well the reorganized Debtors do with the disputed claims vetting process and the overall value of those distributions will be dependent on the price of CHMT.
Back in May I stated:
"I show that, based on the remaining funds within the various pools, the max distribution we could see going forward would be about $0.24 per share based on a CHMT share price of $13.45 as defined by the POR."
The actual total per share distribution
The litigation assets are the most likely source of value for shareholders and unsecured creditors. I do believe that this alternative is much preferable to the last POR that was out there. We just went through 4 months of silence following the Judge handing the EC a "hammer". I can't imagine the EC or the UCC would sit idly by for that long and hold out for a less favorable outcome. I believe this outcome strips the DIP lenders of the windfall profits they thought thet were going to receive at our expense.
I expect that there will be more in the future but i'm not going to put any numbers out there at this point. I need to go back and reconcile the settlements vs. the distributions. We should see another quartely statement in a month or two which will provide better clarity on what is left over.
Chemtura Announces Supplemental Distribution to Legacy CEMJQ Shareholders
http://thediligentinvestor.blogspot.com/2011/08/chemtura-announces-supplemental.html
Chemtura Announces Supplemental Distribution to Legacy CEMJQ Shareholders
http://thediligentinvestor.blogspot.com/2011/08/chemtura-announces-supplemental.html
Point Blank Solutions Announces §363 Sale
http://thediligentinvestor.blogspot.com/2011/08/point-blank-solutions-announces-363.html
Point Blank Solutions Announces §363 Sale
http://thediligentinvestor.blogspot.com/2011/08/point-blank-solutions-announces-363.html
It was denied. It did come out, however, that we will effectively be recognized as certified class. My understanding was that a certification of counsel will be forthcoming on the docket to that effect.
No problem.
Next court date is September 15th. The new developments consist of (1) the company appears to be making money (even if only for a while) and may not be administratively insolvent if things continue to progress as they have and (2) the once prevalent rancor appears to have given way to consensual and civil negotiation as evidenced by a dearth of combative filings on the docket. IMO, this is an entirely different case now.
For now the silence is music to my ears. Equity is now represented by very competent counsel with a great track record for obtaining successful results for shareholders.
There is nothing to say other than we fought for an equity committee 3 times over 5 months and finally were successful. The EC got us a recovery, it wasn't as much as we wanted and it was predicated on a POR value that was heavily discounted to the market post- emergence, but we got a recovery at emergence nonetheless and have received additional recoveries since then and more payments are forthcoming. The Debtors have done a great job of settling disputed claims at levels that will provide for future payments to legacy shareholders and they have done it very swiftly considering the nature of the disputed claims.
At this point there is nothing to be gained from hand wringing or name calling because you can't go back and undo or relitigate the past. Love it or hate it, this is how Chapter 11 bankruptcy works in the U.S. It is not a perfect system but it beats most of the alternatives.
We do know that the Debtor gave Siemens credit of $6 to $7 million for canceling their 6.4 million shares so that provides some baseline value which was likely discounted somewhat. It's not likely that they would have given them credit for their high end estimate of value.
I'm not going to opine on a per share value because all of the facts are not known. I haven't seen the Asset Purchase Agreement between HearUSA and Siemens yet and that will spell out with more specificity what is and what is not being assumed. When you are attempting to determine the amount of cash left to be distributed to shareholders you need to consider that there are likely employee related severance costs, sale transaction fees, F/A success fees, Demant's breakup fee ($2 million), payment to Preferred holders (~$2.3 million) and some level of unassumed unsecured claims that still need to be vetted that come out of the cash recovery.
HearUSA Qualifies Siemens' Bid, Responds to Equity Committee Objection
http://thediligentinvestor.blogspot.com/2011/07/hearusa-qualifies-siemens-bid-responds.html
Siemens Bid for HearUSA Not Yet Qualified
http://thediligentinvestor.blogspot.com/
Chemtura Settles Remainder of Oildale Claim
http://thediligentinvestor.blogspot.com/2011/07/chemtura-settles-remainder-of-oildale.html
HearUSA Equity Committee Objects to Sale as Siemens Shoots for the Moon on Alleged Contract Rejection Damage Claims
http://thediligentinvestor.blogspot.com/2011/07/hearusa-equity-committee-objects-to.html
The EC has just objected to the sale. I'll get back to you.
Siemens Submits Qualified Bid in HearUSA Auction
http://thediligentinvestor.blogspot.com/2011/07/siemens-submits-qualified-bid-in.html
Case Update: Point Blank Solutions 07/22/2011
http://thediligentinvestor.blogspot.com/2011/07/case-update-point-blank-solutions.html
Siemens Submits Qualified Bid in HearUSA Auction
http://thediligentinvestor.blogspot.com/2011/07/siemens-submits-qualified-bid-in.html
Case Update: Point Blank Solutions 07/22/2011
http://thediligentinvestor.blogspot.com/2011/07/case-update-point-blank-solutions.html
There were (2) separate disputed claims reserves established in addition to the Environmental and Diacetyl reserves. These disputed claims reserves were separated based on whether the disputed claimants had objected or not objected to the dollar amounts established as disputed reserves set aside under the Debtor's POR.
Those who objected to the amounts estimated by the Debtors under their POR had a reserve established for their sole benefit and the amount ultimately set aside for each of the objectors asserting disputed claims was either stipulated by agreement or the amount was established by Court order. This part of the reserve is called the "Segregated Reserves". There were (8) of these objectors which included names you've seen mentioned on this board including Oildale, BKK, Cooper Drum, Spartech, Pentair, Beacon, Flabeg & Dow. Under the "Reserve Order" when a settlement or final ruling occurs with respect to any of these individual segregated reserves the award or settlement amount is paid to the claimants. Any amounts not paid to these claimants because the award is smaller than the reserve amount is then further distributed with 50% going into what is called the "Non-Objecting Creditor's Reserve" and 50% being distributed to old CEMJQ holders. As of June 30, 2011 there was $7.4 million remaining in the "Segregated Reserves".
The Non Objecting Creditor's Reserve contains amounts set aside for claimants with disputed claims who did not object to the Debtor's reserve estimate. As these claims are settled, litigated or expunged amounts are paid or not paid to the claimants. The Debtors can make distributions from this reserve to old CEMJQ holders when the amount in the reserve exceeds 120% of the amount the Debtors estimate to be necessary to pay off the claims if they are allowed. We are soon to receive a distribution of this sort because 50% of the recently reduced Oildale Reserve would have caused the Non-objecting creditor reserve to be overfunded beyond the 120% threshold. Once all of the disputed claims are litigated, settled or expunged the old CEMJQ holders will receive the remaining amounts. The timeframe for final vetting of these claims is unknown but the Debtors have been working very hard to move the process along.
As of June 30, 2011, the remaining amount of distributable value in the Non-Objecting Creditors’ Reserve was approximately $44 million and there were 1,360 Disputed Claims yet to be resolved including approximately 450 Disputed Claims filed by two law firms with respect to which the Reorganized Debtors have settlements in principle that are subject to documentation and Court approval and approximately 570 Disputed Claims filed by Lemberg and Associates on behalf of claimants for the possible future modification of post-employment benefits, as to which an objection is pending.
See the following links for more information:
http://www.kccllc.net/documents/0911233/0911233101029000000000007.pdf
http://www.kccllc.net/documents/0911233/0911233110715000000000002.pdf
Chemtura Announces Settlement with Cooper Drum Cooperating Parties Group
http://thediligentinvestor.blogspot.com/2011/07/chemtura-announces-settlement-with.html
I haven't looked at it and I can't respond to PMs because I am not a premium member here.
The answer requires that a number of assumptions are made and some of the facts are unknowable as of now. However, given the following assumptions the economic value of the next distribution would be approximately $0.055 per old CEMJQ share:
Assumptions:
Stated Value of Distribution (based on plan value): $10.6 million
Distribution allocation: 15% cash 85% CHMT stock
Plan Value for CHMT stock: $13.45
Current Market value of CHMT: $17.76
Old CEMJQ shares: 243 million;
The motion to authorize the distribution was approved yesterday.
My guess is that had the Equity Committee not requested that all of the released Oildale funds be distributed then we might have had a distribution (of 1/2 the amount) on or around July 8th. Since there was another $5.3 million in cash and stock up for distribution, waiting around another 7-10 days is worth it. Making one distribution as opposed to two makes sense from an administrative convenience standpoint.
Jared,
I am sorry to hear of Ralph's passing and to hear that you have lost a friend. My condolences go out to all of Ralph's friends and family.
There is a hearing on July 14th to approve the $10.6 million distribution to shareholders from the reduced Oildale Reserve. The distribution will likely be made a few days after the judge enters the order.