In my last post, I laid out the Legal Language that affects the "controlled group" (CG) and "controlled corp (CC) in terms of the 6 Billion NOL.
Now, it all comes down to math.
As I said before the CG currently has plus 50% control of WMIH. In terms of KKR, even though they currently own "no equity in WMIH" they are considered an owner by the IRS because of the stock warrants (71.4M) they possess and for income tax purposes, the IRS deems them an owner of stock in WMIH.
SO if KKR owns 71.4M of WMIH and 200M in Preferred stock redeemable for another 88M in stock of WMIH on a "Qualified Acquistion" (QA), then the CG has to receive stock to counter-balance the KKR ownership. KKR wants to invest up to 1 Billion in WMIH in the next 2 years plus own up to 42.5 of stock. We are A/S at
3.5B now
3.5 x 42.5= 1.48b SHARES.
I think it was 185M that made up the CG. (correct me if I am wrong)
185/201= 92.5% is the CG.
This CG has to keep 50.1% control of WMIH.
If all stock is O/S this equals 1.75B
Let's say WMIH only issues 50% of the stock.
That means the CG has to possess 876M shares of WMIH.
We currently posses 185 + (new 5M escrow given to us) = 190M shares
It has to be this way, if you want to keep the NOL.
If the Preferreds and the warrants are redeemed when WMIH makes a QA, (it's the only way to use the escrow money), that is 225M to 71M = 296M we have to keep KKR at or below 42.5. Why?
Because of this... 185/201= 92.5% is the CG.
When you look at the math, the 42.5% counters the CG at 50.1 and the shareholders outside the CG.
No matter how it shakes out, the CG has to maintain 50.1% control of WMIH
296M is over the current 201 and the 190M (CG)
190/296=64%
that means we have to at least go to 296 X 144% = 426M has to be owned by the CG.
We currently have 190.
426/190= 2.25
Each shareholder in the CTG would need to be issued 2.25 shares to keep the CTG in control of WMIH. If the Preferred and warrants were redeemed for equity.
this would push the O/S to
426 (CG) +190 (current CG) +296 (Pref,Warrants KKR/CITI, etc) 15M (outside CG)= 927M
CG would then own 426+190=616
616/927=66% of WMIH.
KKR would be on their way to 42.5, they would own 71.4M to 88M = 160M shares
160/927= 16.5%
This leaves room for WMIH to do this 2 more times, if WMIH wants to protect the NOL.
There really is no way to protect the NOL and not issue shares to the CG. I challenge anyone on here, to prove me wrong on this. Play with the math all you want, change the figures, you still have to keep the CG in control.
Cheers
GO DUCKS!
~Don~
GO DUCKS !!!!
