It is normal for any corporation the size of WMI/WMB to have a contingency plan. Sometimes the anticipated result of the plan, “Plan A”, becomes more desirable than the result of the existing business. Because the players planned how to initiate “Plan A” well in advance, the catalyst for this to happen was the crash of 2008
In the case of WMI/WMB, the value was supposed to be in the mortgages reported over the years. Apparently, the rat maize of selling and hiding the mortgages may have resulted in allowing WMI to skim the cash from the maize, and send it somewhere other than to the shareholders, leaving a hollow shell of paper mortgages and a confusing trail for anyone to follow. Another warped twist in the WMI/WMB bankruptcy was that the planners had allotted many of the mortgages to “mortgage pools” under the definition of “exempt assets”, which could not be discussed in the “open” bankruptcy proceedings. Therefore, the “behind closed doors” meetings, the redacted documents, and the sealed documents, which referenced the mortgages, took place. As far as the bankruptcy court was concerned, approximately $350B+ in mortgages did not exist, and no one could use their value in negotiating the outcome of the bankruptcy. Some of the creditors were also players in the plan, and already knew this aspect of the bankruptcy. However, they also knew the FDIC-R would return any value to the estate after they liquidated all seized assets, which, by law, included the “exempt assets”. They would also pay allowable claims before closing the receivership. The most important part of the plan was to cancel equity. The EC, Nate Thoma and Susman Godfrey & Partners prevented this maneuver.
When the presiding judge approved POR7, she guaranteed equity to have the same fair and reasonable recovery that anyone else was going to get from that point on. The only difference was that there were different classes of shareholders on the WAMU side of the bankruptcy, which would receive different levels of recovery. With the exception of having different levels of knowledge and different ways to get it, shareholders on the WMIH side of the equation are mostly the same.
One of the major things, mostly ignored by posters on this board, is that JPM owned millions upon millions of shares of WMB. I cannot locate my list of shareholders from that era, but I think Goldman Sachs was a very large shareholder too. There were other familiar names listed with very large holdings. Keeping in mind they all had their own special tentacles of moles and insiders vested throughout each organization, and because the outcome of the plan was very lucrative if the BOD cancelled equity, it is clear they and the WMI executives were the major players and designers of the plan. Third party lawsuits? I think not!
Several posters are adamant the escrow shares are relatively worthless, and base their analysis on all “open” court documents filed. They are accurate up to that point. Those posters who believe in value for the escrow shares live in hope the FDIC-R is adhering to the letter of the law (which they are), and will return “some value” to the estate for distribution. Only time will reveal the outcome. I think there will be value returned; how much is the question.
Those of us on the WMIH side should be watching very closely to see if the BOD up-lists WMIH to a higher exchange. This should happen within a reasonable time after the closing of the PA&A and the consummation or official announcement that a merger has taken place. If they do not, you should be prepared to sell out instantaneously. The risk will be that the players will drive the PS down to worthless, and then they will find a legal way to sell WMI, leaving the common shareholder with nothing again.
If they do up-list, hang on for a wild ride.
Mostly fact.
