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I am trying to fill out the election form I got from Fidelity and am finding it a little confusing. If I want to get all stock to enter 100% in the first box and 100% in the second?
Can someone go through the math on how the Orkney unwind would add to book value?
Thanks-
Scott
This may have been discussed previously but I wasnt able to find it. Does anyone have any insight as to the election we are being asked to make by April 21st? Will we be at a disadvantage if we dont do anything?
Scott
Anybody see this filing? Page 38 of the PDF. In regard to DIMEQ:
"Debtors seek to estimate their maximum exposure at $250 million for such claims"
http://www.kccllc.net/documents/0812229/0812229101117000000000051.pdf
I am also hearing there may be another filing shortly detailing how the $250 million exposure was reached.
Scott
Thank you
I meant to say is there a replay so I could listen to the hearing
Scott
Is there a reply for the hearing?
Thanks-
Scott
Bluzie-I havent been following this too closely recently but has the court in fact granted class action status to DIMEQ thereby invalidating the need to file proof of claim?
Scott
Does anyone know when the next hearing is scheduled for? Has an agenda been released yet?
Thanks,
Scott
Few things.
1)Most accounts I have worked with tend to place orders at the open, once the two sided picture has been established and if they get filled during the day there isnt always someone there to pick up the slack so price drifts lower later in the day
2)We have become conditioned to always expect an explanation especially from the media as to a reason for a price move regarless of how small....words like "profit-taking" is just a euphenism for we dont really know why its moving and cant just say "more buyers than sellers". With a stock like DIMEQ it doesnt take much to push it up or down due to an order imbalance...I remember a few months ago there were 4 hedge funds who happened to finish their work on this at about the same time and all tried to get in at once and drove the price up 15 cents in a matter of days absent any news. Once they were all filled the price drifted back down about 10 cents. My point is with illiquid securities there often isnt any rhyme or reason to price movements so dont knock yourself out trying to find one.
Scott
Hi Jared-
Regardless of the means of delivery(stock, cash, etc.) or timing (before or after wamu acquistion), each LTW should have a value = Adjusted Litigation Recovery/Outstanding warrants. The merger exchange ratio shouldnt come into the calculation at all. After all, this security is traded separately from DIMEQ and its value doesnt have anything to do with what DIMEQ shareholders received during the merger.
I think the lawyer that rewrote the amended agreement didnt understand that that since LTWs dont have a strike price there isnt any reason to adjust for the merger ratio.
I spent a considerable amount of time on the NAMCO valuation and strongly believe the 63 million award has no merit. However, the court used an approximation for retained earnings for the period between '95 - '97 since the actual numbers werent available. That is except for anyone who bothered to query edgar filings and get the figure which is available thru June '97. If we take the real numbers and then approximate the last three months (7/97-10/07) based on an interpolation over the previous two years it appears they are owed no more that $14,000,000.
1)Start with Purchase Price of NAMCO
$351,000,000
2)Subtract Retained Earnings June 30, 1997
-$144,064,000 (Filings NAMCO 10Q)
3)Subtract Interpolated Additional Earnings
-$7,025,833 Interpolated incremental qtrly retained earnings b/w 1st qtr '96 to 2nd qtr '97
New Mitigation Cost $199,910,167
Previous $185,900,000
Addditional Award $14,010,167
I assumed the same number of LTWs outstanding for both calculation. Where the dilution comes in is the merger adjusted stock price. Essentially for the calculation we assume the stock price is higher than it really is by multiplying it by the merger ratio to determine the number of shares/LTW. However, this lowers the value of each LTW. There isnt any reason why the value of the LTWs should be lower after the merger, but according to the formula in the warrant agreement they are. Am I missing something?
according to revised warrant agreement, it appears we get diluted:
Value delivered to the LTW holders regardless of means (stock, cash etc.) should be Adjusted Litigation recovery/Number of warrants outstanding. I worked through the calculation using my numbers and the original warrant agreement from 2000 and got the following:
Adjusted Litigation Recovery = $255,886,646.23
Avg Px of Dimeq = $20
Adjusted Stock Price = $19.99
LTWs outstanding = 112,975,607
Number of Shares of Common Stock purchase at $.01 = .11331
Cost of Excercise = $.00113
LTW Value = $20 X .11331 - .00113 = $2.265
However if I use the methodology suggested in this report from 2003
http://www.secinfo.com/dRM18.229.htm#1stPage
I get a different value:
LTW = (Adjusted Litigation Recovery/Merger Adjusted Stock Price) X 1/112975607
= (255,886,646.23/22.46) X (1/112975607)
= .1083 Shares = $2.017/warrant
Anybody have any thoughts here?
Sorry this may have been discussed previously but can someone tell me how the the Dime Exchange Ratio (1.1232) was calculated on page 12 of the Warrant agreement? I thought the ratio the transaction took place at was 1.05? Also, did the merger change the number of warrants outstanding?
Not sure how significant this is but apparently the court received my objection on July 7th and still posted it so maybe the deadline was extended...
http://www.kccllc.net/documents/0812229/0812229100707000000000012.pdf
See message 1981...I am just going to use that
I am working on the objection letter on behalf of several investors and would like to send out a link of the announcement that the hearing was delayed. Any idea where that might be posted?
Regards,
Scott
Should all holders have gotten one of these notices?
Scott
I don't believe a settlement is very likely with only Broadbill...If that did happen it would make JPM a target for further litigation outside of Bankruptcy court since it would establish the legitimacy of the LTW holders as having a legitimate claim to the litigation proceeds....
If you ask me pretty lame and to quote the WMI guys in regard to Broadbill "Wholely without Merit!"
http://definitions.uslegal.com/e/executory-contract/
"An executory contract is a contract under which one or more parties has not yet performed. For example: Abel orally has agreed to buy Baker's land, and Baker's attorney has drafted a contract. At this stage it is executory because neither Abel nor Baker has signed it.
In bankruptcy law, an executory contract is a contract between a debtor and another party under which both sides still have important performance remaining. Examples of executory contracts are real estate leases, equipment leases, development contracts and licenses to intellectual property"
http://www.answers.com/topic/chapter-11#Executory_contracts
"Executory contracts
Some contracts, known as executory contracts, may be rejected if canceling them would be financially favorable to the company and its creditors. Such contracts may include labor union contracts, supply or operating contracts (with both vendors and customers), and real estate leases. The standard feature of executory contracts is that each party to the contract has duties remaining under the contract. In the event of a rejection, the remaining parties to the contract become unsecured creditors of the debtor. For example, in some districts a contract for deed is an executory contract, while in others it is not."
What performance is remaining (or has even been) from the LTW holders?
From Disclosure Statement For First Amended Joint Plan 5/16/10
13. Other Material Litigation
b. On April 12, 2010, Broadbill Investment Corp. commenced an adversary proceeding against WMI related to the Anchor Litigation, discussed above. Broadbill's complaint seeks several declaratory judgements by the Bankruptcy Court, including a ruling that the holders of the LTWs have allowed claims against WMI. The Debtors believe the causes of action in the complaint are wholly without merit and intend to oppose the relief requested in the Broadbill complaint.
Jared-
Re WMI:
As far as culpability of WMI, there is some debate as to where the litigation trust resides. Based on what happened with the ASB litigation proceeds of $55,000,000 which were deposited with the Estate, I believe the Anchor litigation is currently in the Estate. If that were the case maybe they make the case no "trigger" and staus quo. If the plan is confirmed as written that will change that.
Re FDIC:
It comes down to one thing for these guys:
§ 360.1 Least-cost resolution.
http://www.fdic.gov/regulations/laws/rules/2000-7800.html#fdic2000part360.1
Its goal is to minimize the cost involved in bailing out the bank and fidicuary responsibilities only apply to depositors. If they can "eff" us (and they already tried once), they will. But the good news is that if we have to litigate either inside or outside of bankruptcy court, I feel a judge with any sense of justice would see what they did as a significant abuse of power, especially after 15 years of litigation and then for them to hand it over to someone else...
Re ultimate resolution:
I think it will be difficult to derive a settlement in bankruptcy court for the following reasons.
1) The FDIC hasnt been ordered to pay anything yet. The judge is waiting till final award determination...so claim amount would be subject to debate..
2) We dont know the final settlement amount nor the timing. The other unsecured creditors might argue that there is a chance the FDIC gets the supreme court to hear an appeal and maybe we lose, etc...
However, I do believe Broadbill complaint will lead to us getting amended warrant agreement outside of the bankruptcy court which I think would be the best option for us....We wouldnt have to contend with other creditors trying snake us out of what is ours.
Regards,
Scott
Thanks Jared I wasnt aware that was the primary objection to the POR in its current form coming from the FDIC. However, my interpretation is that if they agree to repudiate the warrant agreement which is in the current plan of reorg they will be responsible for damages on behalf of the LTW holders.
Scott
If the plan of reorg is confirmed in its current form, I believe the FDIC is agreeeing to repudiate the warrant agreement. My interpretation (and I am not a lawyer) is that this would supercede the fact that JPM agreed to assume all QFCs and our recourse would be with the FDIC, not JPM.
Up until the POR was filed, I dont know there was a case against WMI or JPM since it wasnt clear whether the litigation claims were at the estate or JPM. Now that the new plan calls for us to get nothing that has changed though.
In my opinion, I don't think we become unsecured creditors because no money has actually been paid out by the FDIC and the court hasnt come to a final decision and may not for a year or two. But what I do think happens is that the Broadbill complaint causes WMI/JPM to amend the agreement and ultimately pay us in cash or stock once the Anchor litigation is finalized.
Is is possible to post a MS word file to the message board? The reason I ask is all the formatting on my original report was lost when I cut and pasted it.
Scott
1) Background and Anchor Litigation Claim from Plan of Reorganization
a. Goodwill Litigation.
On August 9, 1989, the Financial Institutions Reform, Recovery and Enforcement Act was enacted (“FIRREA”). Among other things, FIRREA raised the minimum capital requirements for savings institutions and required a phase-out of the amount of supervisory goodwill that could be included in satisfying certain regulatory capital requirements. FIRREA represented an abrupt change in federal policy. The exclusion of supervisory goodwill from the regulatory capital of many savings institutions led them to take actions to replace the lost capital either by issuing new qualifying debt or equity securities or to reduce assets. A number of these institutions and their investors subsequently sued the United States Government seeking damages based on breach of contract and other theories (collectively, the “Goodwill Lawsuits”). To date, trials have been concluded and opinions have been issued in a number of Goodwill Lawsuits in the United States Court of Federal Claims.
(i) American Savings Bank, F.A.
In December 1992, American Savings Bank, F.A. (“ASB”), Keystone Holdings, Inc. (“Keystone”), and certain related parties (the “American Savings Plaintiffs”) filed suit against the United States Government, alleging, among other things, breach of contract as a result of the passage of FIRREA and its implementing regulations as related to their acquisition of ASB. Keystone and its subsidiaries were thereafter acquired by WMI and, WMI or its subsidiaries succeeded to all of the rights of ASB, Keystone, and the related parties in such litigation and will, as a result, receive any recovery from the litigation.
After many years of litigation, on December 18, 2006, the United States Court of Federal Claims entered a partial judgment against the United States in the approximate amount of $55 million (the “American Savings Judgment”). See American Savings Bank, F.A. v. United States, No. 92-872C, currently pending in the United States Court of Federal Claims (the “American Savings Litigation”). The judgment was appealed but ultimately affirmed by the United States Court of Appeals for the Federal Circuit on March 6, 2008. On September 12, 2008, over the Government’s objection, the Federal Claims Court entered the American Savings Judgment as a partial final judgment in accordance with the Federal Circuit’s affirming order.
In the JPMC Adversary Proceeding, filed on March 24, 2009, JPMC asserted, among other things, that WMB and, consequently, JPMC, which purchased certain assets of WMB, is the rightful beneficiary of the American Savings Judgment rather than WMI. WMI disputes JPMC’s ownership interest in the American Savings Judgment.
On January 6, 2009, the United States filed a motion for an order lifting the automatic stay to allow the Government to setoff the American Savings Judgment against amounts allegedly owed by WMI to the Internal Revenue Service (the “Setoff Motion”). The Debtors opposed the Setoff Motion and on February 16, 2009, the Bankruptcy Court ordered the American Savings Judgment be paid into the Bankruptcy Court’s registry (the “Registry Funds”), until the proper recipient could be determined.
Pursuant to the Proposed Global Settlement Agreement, JPMC, the FDIC Receiver, and FDIC Corporate have agreed to waive and release any and all rights and claims associated with the American Savings litigation, including, without limitation, any rights and claims to (A) the Registry Funds, and (B) any funds held in escrow pursuant to that certain Escrow Agreement, dated December 20, 1996, by and among WMI, Keystone Holdings Partners, L.P., Escrow Partners, L.P. and The Bank of New York.
(ii) Anchor Savings Bank FSB.
In January 1995, Anchor Savings Bank FSB (“Anchor”), filed suit against the United States Government for breach of contract arising out of FIRREA and for unspecified damages involving supervisory goodwill related to its acquisition of several troubled savings institutions from 1982-1985. The Dime Savings Bank of New York, FSB (“Dime Bank”) acquired Anchor shortly after the case was commenced and Dime Bank assumed the rights under the litigation against the Government. Dime Bancorp, Inc. (“Dime Inc.”), the parent company to Dime Bank, distributed a Litigation Tracking Warrant™ (an “LTW”) for each share of its common stock outstanding on December 22, 2000 to each of its shareholders on that date based on the value of the recovery in the Anchor litigation. In January 2002, Dime Bank and Dime Inc. merged into WMB and WMI, respectively.
As a result of these mergers, the LTWs are now, when exercisable, exchangeable for shares of WMI’s common stock. Prior to the Commencement Date, the LTWs traded on the Nasdaq National Market under the symbol “DIMEZ.” On October 30, 2008, WMI received a notice from Nasdaq delisting the LTWs and the LTWs ceased trading on November 6, 2008. WMI filed a Form 25-NSE with the SEC on November 14, 2008 which removed the LTWs from listing and registration on the Nasdaq.
In a series of decisions issued in 2002, the United States Court of Federal Claims
concluded that FIRREA breached the government’s supervisory goodwill contracts with Anchor. Thereafter, in a decision dated March 14, 2008, the United States Court of Federal Claims, held that Anchor was entitled to recover lost profits and other damages in the amount of approximately $382 million, plus an undetermined amount for a gross-up of tax liabilities. On July 16, 2008, the court reduced the judgment to approximately $356 million. On March 10, 2010, the Federal Circuit Court of Appeals affirmed the judgment of approximately $356 million, and also remanded the case to the Court of Federal Claims for further determination of whether that court had made a calculation error and should increase the damage award by as much as an additional $63 million.
Similar to the American Savings Judgment, in the JPMC Adversary Proceeding, JPMC has asserted that it is entitled to the damage award relating to Anchor, rather than WMI. Pursuant to the Proposed Global Settlement Agreement and sections 363 and 365 of the Bankruptcy Code, WMI will be deemed to have sold, transferred and assigned to JPMC any and all right, title and interest it may have in the Anchor litigation, free and clear of any liens, claims, interests and encumbrances, including, without limitation, any liens, claims, interests and encumbrances of holders of the LTWs, and the FDIC Receiver and FDIC Corporate will be deemed to have waived and released any and all rights and claims associated with the claims, causes of action, damages, liabilities and recoveries associated with the Anchor Litigation.
PROVISION FOR TREATMENT OF DIME WARRANTS (CLASS 20)
24.1 Cancellation of Dime Warrants: Holders of Dime Warrants shall receive no distribution under the Plan. On the Effective Date, all Dime Warrants shall be deemed extinguished and the certificates and all other documents representing such Equity Interests shall be deemed cancelled and of no force and effect.
Comments:
In an order issued by the court 2/16/09 in regard to the partial payment from the American Savings Bank litigation or $55,000,000, the court ordered that:
“Any party, other than the debtors, asserting an ownership interest in the funds must bring its claim before the Bankruptcy Court through the commencement of an adversary proceeding in accordance with Rule 7001 of the Federal Rules of Bankruptcy Procedure….”
It would appear that the burden is on JPM to prove that it actually owns the litigation claims and that they currently reside in the bankruptcy estate which may explain why they aren’t demanding the proceeds from the ASB litigation in the settlement. As far as JPM getting the Anchor litigation the motivation is clear…If it were to remain in the creditor pool the current group of unsecured creditors would have to contend with the claims of the LTW holders.
2) LTW holders’ Claim
Items in Italics taken directly from the amended warrant agreement dated 2003
On September 25, 2008, while WMI was pursuing these alternatives, the OTS appointed the FDIC as receiver for WMB and advised that the receiver was immediately taking possession of WMB. The receiver sold substantially all assets of WMB to JPMC pursuant to the Purchase and Assumption Agreement dated the same day. On the day following the Bank Receivership, the Debtors filed these chapter 11 cases to preserve their assets and maximize the value of their estates for the benefit of their creditors.
"Combination" means an event in which the Company consolidates with, merges with or into, or sells all or substantially all its property and assets to another Person.
4.2 Combination. (a) Except as provided in Section 4.2(c), in
the event of a Combination, the Holders will have the right to receive upon exercise of each Warrant the number of shares of capital stock or other securities or an amount of property equal to the Adjusted Litigation Recovery divided by the Maximum Number of Warrants divided by the aggregate Adjusted Stock Price of the capital stock, other securities or property that 1.1232 shares of Common Stock were exchanged for or converted into as a result of such Combination.
March 12 (Bloomberg) -- Washington Mutual Inc. will collect at least $5.95 billion, less than the $20 billion estimated by shareholders, in a proposed settlement of the bankrupt company’s yearlong battle with federal regulators and JPMorgan Chase & Co.
c) In the event of a Combination where consideration is payable to holders of Common Stock in exchange for their shares solely in cash,
the Holders will have the right to receive upon exercise of each Warrant cash in an amount equal to the Adjusted Litigation Recovery divided by the Maximum Number of Warrants, less the Exercise Price (if any). In case of any Combination described in this Section 4.2(c), the surviving or acquiring Person will promptly after the occurrence of the Trigger deposit with the Warrant Agent the funds necessary to pay to the Holders of the Warrants the amounts to which they are entitled as described above. After such funds and the surrendered Warrant Certificates are received, the Warrant Agent is hereby instructed to make payment to the Holders by delivering a check in such amount as is appropriate to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrants. No interest will accrue to the Holders or the surviving or acquiring Person on such funds.
4.4 Other Events. If any event occurs as to which the foregoing provisions of this Article IV are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Holders of the Warrants in accordance with the essential intent and principles of such provisions, then the Board may make, without the consent of the Holders, such adjustments to the terms of this Article IV, in accordance with such essential intent and principles, as will be reasonably necessary, in the good faith opinion of such Board, to protect such purchase rights as aforesaid.
4.5 Notice of Certain Transactions. In the event that the
Company will publicly announce a plan (a) to effect any reclassification, redesignation or reorganization of its shares of Common Stock, (b) to effect any capital reorganization, consolidation or merger or (c) to effect the voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will within 5 calendar days after such public announcement send to the Warrant Agent and the Warrant Agent will within 5 Business Days after receipt of such notice thereof and the form of notice of action, send the Holders a notice(in such form as will be furnished to the Warrant Agent by the Company) of such proposed action, such notice to be mailed by the Warrant Agent to the Holders at their addresses as they appear in the Certificate Register, which notice will specify the expected date that such issuance or event is to take place and the expected date of participation therein by the holders of Common Stock and will briefly indicate the effect of such action on the Common Stock and on the number and kind of any other shares of stock and on other securities or property, if any, and the number of shares of Common Stock and other securities or property, if any, purchasable upon exercise of each Warrant and the Exercise Price after giving effect to any adjustment which will be required as a result of such action.
To my knowledge there has been no communication whatsoever between the agent and the warrant holders since the filing.
(d) The Company hereby represents and warrants that any
Successor Company will enter into, and the Company will provide, an agreement with the Warrant Agent confirming the Holders’ rights pursuant to this Section 4.2 and providing for adjustments, which will be as nearly equivalent as may be practicable to the adjustments provided for in this Article IV.
6.3 Control of Litigation. The Bank will retain sole and
exclusive control of the Litigation and will retain 100% of any recovery from the Litigation. The Holders will not have any right to control or manage the course or disposition of the Litigation or the proceeds of any recovery therefrom or any rights against the Company for any decision regarding the conduct of the Litigation or disposition of the Litigation for an amount less than the amount claimed in damages in the Litigation, regardless of the effect on the value of the Warrants.
Comments:
I am not a lawyer but see highlighted text and draw your own conclusions
3) Determination of ultimate LTW claim value
Lost Profit Attributable to forced sale of RFC $111,619,000 Order Correcting Clerical Mistake 7/16/08
Expectation damages from reduced stock proceeds $42,000,000 Opinion and Order 3/14/08
Mitigation costs of lost benefit from forced sale of RFC $185,900,000 Opinion and Order 3/14/08
Damages Due to Branch Sales $8,146,125 Opinion and Order 3/14/08
Wounded Bank damages $4,133,227 Opinion and Order 3/14/08
Increased FDIC Insurance Premiums $4,656,559 Opinion and Order 3/14/08
Total Before Gross-ups and additional awards $356,454,911 Order Correcting Clerical Mistake 7/16/08
Additional cost of lost benefit from forced sale of RFC* $14,010,167
Gross up* * $161,273,444
Litigation Expenses -$30,000,000 Estimate
Total Before Federal Taxes $501,738,522
Net After Federal Taxes $301,043,113
LTW Recovery $2.26
* My estimate of the portion of the additional $63,000,000 award using the courts original methodology and retained earnings of $144,000,000 for NAMCO as of June 30, 1997 (Source: Edgar Filings)
**See Opinion and Order 3/14/08 Page 159 for explanation and sample Gross-up calculation. I used a tax rate of 40% for simplicity.
Comments:
Range of values is $2.16 (No additional award) to $2.63 ($63,000,000 additional award). Disclosure: This is my estimate and actual award may vary significantly
4) Time horizon
Taken from Warrant agreement:
"Trigger" means the occurrence of all of the following events:
(a) receipt by the Bank of the Amount Recovered in full,
(b) determination by the Bank of the amount of the Adjusted Litigation Recovery and
(c) receipt of all regulatory approvals necessary to issue the shares of Common Stock to be issued upon the exercise of the Warrants, including without limitation, the effectiveness of a registration statement relating to the issuance of the Warrant Shares under the Securities Act.
Comments:
Although there may be an opportunity to realize a percentage of the claim value upon a favorable ruling in bankruptcy court, based on the language in the agreement there is a chance the award wouldn’t be paid out until the court finalized the award. Additionally, there would be complications involved in LTW’s claims treated as unsecured creditors. Although there is an award it hasn’t been paid out yet and probably will not until the lower court determines the additional award, if any. Secondly, is the ultimate award figure is unknown and may still be before confirmation of the plan.
The most likely scenario provided the rights of LTW holders is upheld may be an amendment of the warrant agreement ultimately payable in JPM stock.
5) Proof of Claim requirements
In a motion filed dated October 2, 2008, WMI waived requirements to provide notice of the chapter 11 case (Rule 2002(d) to equity security holders. WMI further submitted that if it becomes necessary for such equity holders to file a claim they will be notified.
“16. WMI is a public company and, as of the Commencement Date, had approximately 1.7 billion shares of common stock and approximately 3 million shares of preferred stock outstanding. The Debtors submit that preparing a list of WMI’s equity security holders with last known addresses and sending notices to all parties on such list will be expensive and time consuming and will serve little or no beneficial purpose. The Debtors further submit that, if it becomes necessary for such equity security holders to file proofs of interest, the Debtors will provide them with notice of the bar date and an opportunity to assert their interests. Thus, equity security holders will not be prejudiced.”What exactly is an equity security holder? The US Bankruptcy code has the following definition:
“An equity security holder is a holder of an equity security of the debtor. Examples of an equity security are a share in a corporation, an interest of a limited partner in a limited partnership, or a right to purchase, sell, or subscribe to a share, security, or interest of a share in a corporation or an interest in a limited partnership.”
It would seem to me that in spite of the fact we are senior to other equity for claim reasons, we would fall under the category of an “equity security holder”. Additionally, the company never instructed the warrant agent to notify the LTW holders as outlined below so it would seem to me that having not filed a claim before the bar date will probably not be an issue.
4.5 Notice of Certain Transactions. In the event that the
Company will publicly announce a plan (a) to effect any reclassification, redesignation or reorganization of its shares of Common Stock, (b) to effect any capital reorganization, consolidation or merger or (c) to effect the voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will within 5 calendar days after such public announcement send to the Warrant Agent and the Warrant Agent will within 5 Business Days after receipt of such notice thereof and the form of notice of action, send the Holders a notice(in such form as will be furnished to the Warrant Agent by the Company) of such proposed action, such notice to be mailed by the Warrant Agent to the Holders at their addresses as they appear in the Certificate Register, which notice will specify the expected date that such issuance or event is to take place and the expected date of participation therein by the holders of Common Stock and will briefly indicate the effect of such action on the Common Stock and on the number and kind of any other shares of stock and on other securities or property, if any, and the number of shares of Common Stock and other securities or property, if any, purchasable upon exercise of each Warrant and the Exercise Price after giving effect to any adjustment which will be required as a result of such action.
6) Valuation
1) Assign a probability to a favorable court outcome and weigh the corresponding payoff. If we assume 33% probability, the payoff becomes .33 X $2.26 = $.75
2) Discount the cash flow over the appropriate time horizon. I am assuming a payoff upon final judgement by the court and have chosen 2 years. Although one may make the case that the appropriate discount rate is lower, I am using 20%.
$.75/ (1.2)^2 = $.52
If one were to use this methodology for valuation a price of $.52 or less since should generate a return of 20% or more. Obviously a lower price would increase the return to 20%+ (provided my assumptions concerning time horizon and payoff proved correct).
1) Unlike the American Savings Bank litigation, No money has actually been paid out. I expect the judge will wait until the final award decision to order the FDIC to pay.
Per warrant agreement:
"Trigger" means the occurrence of all of the following events:
(a) receipt by the Bank of the Amount Recovered in full
This hasnt happened yet so I think there isnt a huge sense of urgency on behalf of the other parties in this situation to get this resolved immediately.
2)I believe our interests will be best served if there was is final court decision on the Anchor litigation until after the POR was confirmed...This way it would make it less likely some other creditor group tried to glom the award and more likely JPM would put a new warrant agreement in place since by not doing that the POR confirmation could be delayed
1)JPM did a Whole-Bank P&A, which meant it acquired both the assets/liabilities and basically bought the entire bank. In light of this the Anchor Litigation should probably be transferred to it.
2)JPMorgan Chase also assumed the qualified financial contracts which were outstanding against Washington Mutual.
3)(i) QUALIFIED FINANCIAL CONTRACT.--The term "qualified financial contract" means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar agreement that the Corporation determines by regulation, resolution, or order to be a qualified financial contract for purposes of this paragraph (Source FDIC Website)
4)The warrant agreement would qualify as a QFC.
5)From the Disclosure Statement:
"Pursuant to the Proposed Global Settlement Agreement and sections 363 and 365 of the Bankruptcy Code, WMI will be deemed to have sold, transferred and assigned to JPMC any and all right, title and interest it may have in the Anchor litigation, free and clear of any liens, claims, interests and encumbrances, including, without limitation, any liens, claims, interests and encumbrances of holders of the LTWs, and the FDIC Receiver and FDIC Corporate will be deemed to have waived and released any and all rights and claims associated with the claims, causes of action, damages, liabilities and recoveries associated with the Anchor Litigation."
So JPM is basically asking the FDIC to repudiate the warrant agreement. The problem is that if it does, The FDIC then becomes liable for damages:
"Damages. The FDIC is not permitted to repudiate a QFC without compensating the counterparty for the counterparty’s actual direct damages. A counterparty is entitled to receive the normal and reasonable costs of cover or some other industry equivalent, calculated as of the date of repudiation or disaffirmance. However, a counterparty may not receive more than it would have received on liquidation of the depository institution’s assets."
So what this means is that if FDIC repudiates the warrant agreement they could end up paying 2X...Once to JPM and then to warrant holders.
6)Its too late to repudiate the contract:
"TIMING OF REPUDIATION.--The conservator or receiver appointed for any insured depository institution in accordance with subsection (c) shall determine whether or not to exercise the rights of repudiation under this subsection within a reasonable period following such appointment."
"The FDIC shall have a reasonable period of time, generally, no more than 180 days from the date of appointment of the FDIC as conservator or receiver for an institution, to elect whether to redeem or prepay, by repudiation or otherwise, secured obligations of the Institution."
Window is closed...If they havent done it by now they cant do it
For this reason I expect the Anchor Ligitation, to be transferred in its entirety (with a new amended warrant agreement) to JPM. At least this way JPM stands to get 15% of the litigation proceeds
SO AS BUD FOX WOULD SAY, "PUT YOUR BEST CLIENTS INTO IT"
Do you know if any holders of the LTW's received notice of the WAMU bankruptcy with instructions to file a claim before the bar date?
Scott
New to the list so excuse me if this has already been asked:
1)If Broadbill were to prevail in Bankruptcy court, would that mean that all other LTW holders would receive the same award?
2)Would we not have been required to submit a claim prior to the bar date in order to be eligible to receive anything from the WMI estate?
Scott