Mr Cooper Group Inc (COOP)

[ItsMyOption]

jhdf51, I understand and I should posted that as a quote. It was from a post from BOPFAN/CSNY about a concern and request for letter campaign. It may be confusing to many but it has been a big concern of mine that many shaddy deals are being cut behind closed door and we must bring it to attention before it is too late. The first part explains the concern and it is the letter at the end one would need to cut paste send.

POSTED on BP by BOPFAN/CSNY


I have grave concerns that notwithstanding the EC and its counsel's efforts to protect retail we -- the little people -- are about to be deprived of a substantial portion of our long-awaited recovery.

Again, the question is not what will be returned to the LT. The question is whether there are loopholes in the trust agreement such that if property returns Kosturos and the hedge funds can prevent immediate disbursement of such property. I believe that they can as the trust agreement requires liquidation of property in its hands -- i.e., it is the legal owner -- if its interest in property is beneficial I've found nothing in the trust agreement to compel the legal owner to turn over the property to the LT. As I discussed months ago the beneficiary of a spendthrift trust can't compel his trustee to turn over assets and because the beneficiary can't reach them neither can the his creditors.

As a refresher, the people who have managed this business from the beginning are the four Settlement Noteholders ("SNs") led by David Tepper.

The SNs hold “positions at various levels of the capital structures of WMI and WMB”. See p. 6 of this PDF (Document #6020): www.kccllc.net/wamu/document/0812229101119000000000071

This removes any doubt that they were behind the Ad Hoc Committee and its Steering Committee that negotiated the tri-party settlement among JPM, the FDIC, and DB, AND most importantly from our perspective, who are in the WMB waterfall as holders of WMB seniors. While I cannot prove they are currently negotiating with the FDIC for both for their WMB interests and the release of WMI property, I think that is fairly obvious.

For a long time these hedge funds were adversarial to the TPSC members, but since confirmation they have been their allies – and I believe are against retail.

As Document #6020 reveals, before the TPSC allied itself with the SNs it exhaustively discussed the conflicts of interest among the professionals. Of course, after confirmation it fell silent.

Eight years on, the LT is within striking distance of amortizing all creditor classes, leaving only equity. The revelation that TPG/Bonderman has 6.25% of commons is significant because unless hedge funds were willing to risk losing capital in the event common didn’t survive, it means that up to 18.75% of the TOTAL residual (the non-TPG portion of Qs) is in retail hands. Couple that with the fact that retail also owns a substantial portion of the Ps and Ks, which are 35% of the total residual, and it becomes apparent that legacy retail may own up to 53.75% of legacy interests.

The SNs got a trust agreement that allows them to retain their grip on power after all credtiors’ claims have been satisfied and even after they – institutional legacy – become a minority versus legacy retail.

Yesterday I wrote to the United States Trustee, Andy Vara, head of Region 3, and T. Patrick Tinker, the Assistant UST for the Delaware office. I cc’d Steve Susman, Edgar Sargent, and Chad Smith.

(As you know, I wrote to Chad about the matter of the $72MM apportionment but have not had a response.)

I asked the UST to petition Walrath for two orders granting the following:

(1) assigning the $72MM claim to the TPS portion of preferred; and

(2) prohibiting any transaction(s) directly or indirectly involving assets in which the LT has a legal or beneficial interest the result of which would provide any legacy interest holder a direct or indirect financial benefit greater than what that legacy interest holder would receive if the legacy interest holder received only financial benefits disbursed by the LT through the LTIs.

The following is the text of a letter setting forth our concerns and requesting the UST’s assistance. It is a modified version of what I sent yesterday. I cc’d Edgar Sargent and Steve Susman because they approved the plan – including the loophole. While there is no EC they still owe us legacy retail a duty to correct the condition(s) that left us vulnerable to the losses I’ve described.

I think a letter campaign could avail much and suggest you send the letter (see below) to the persons named below (a) by email AND (b) first-class mail.

Text of Letter:

“January [29], 2019

Via Email and First-Class Mail

Andrew R. Vara, Esq.
Acting U.S. Trustee for Delaware, New Jersey and Pennsylvania (Region 3)
Office of The United States Trustee
833 Chestnut Street, Suite 500
Philadelphia, PA 19107
[e-mail]

Re: In re Washington Mutual, Inc., Case No. 08-12229 (MFW) United States Bankruptcy Court, District of Delaware

Request for the United States Trustee (“UST”) to File a Motion Seeking:

(1) Assignment of $72,000,000 in Underwriters’ Claims Exclusively to the TPS Portion of Class 19; and
(2) Protection of Legacy Retail From Deprivation of Full Financial Benefits of Any Legacy Assets That Might Appear After the Bankruptcy Case is Closed

Dear Mr. Vara:

I am a holder of legacy interests in WMI Liquidating Trust (the “LT”), one of the successor entities of Washington Mutual, Inc. (“WMI”), a Chapter 11 debtor whose plan of reorganization was confirmed on February 24, 2012 and which Chapter 11 case remains open and under the jurisdiction of the Hon. Mary F. Walrath.

I am writing to request your immediate intervention with respect to the two (2) aforementioned matters as follows:

1. Assignment of $72,000,000 in Underwriters’ Claims Exclusively to the TPS Portion of Class 19

WMI’s plan has 22 classes, of which Class 19 and Class 22 are equity. Class 19 is legacy preferred and Class 22 is legacy common. Class 19 received 75% of the residual and Class 22 (“Qs”) received the remaining 25%. In order to get a residual interest a holder of preferred or common had to execute a release on or before March 7, 2012. See https://www.prnewswire.com/news-releases/washington-mutual-inc-extends-release-deadline-to-march-7-2012-for-holders-of-preferred-and-common-stock-in-connection-with-the-companys-seventh-amended-plan-of-reorganization-139539448.html

Class 19 consists of three groups:

• Trust preferred securities (“TPS”), which had $4B par;
• P securities (“Ps”), which had $3B par; and
• K securities (“Ks”), which had $500MM par.

The three securities total $7.5B par and given that Qs get 25%, algebraically, for every $10B the LT receives, preferred get par and Qs get $2.5B.

In percentage terms, of the $7.5B preferred receive for par, the TPS get 53%, the Ps get 40%, and the Ks get 7%.

I recently learned that on or about March 28, 2013 three financial institutions who had filed claims against WMI for losses related to underwriting certain of WMI’s securities settled with the LT. These institutions, Goldman Sachs, Morgan Stanley, and Credit Suisse (collectively, the “Underwriters”) received claims in the amount of $72MM in Class 19. See p. F-11 of the LT’s 2014 10-K disclosing the settlement with the Underwriters (the “10-K”) https://www.sec.gov/Archives/edgar/data/1545078/000119312515114171/d875724d10k.htm#toc875724_25

In essence, the Underwriters were allowed to release over one year after the original deadline and, received nearly one-percent (1%) of Class 19.

It is a matter of concern to other members of Class 19 which sub-class or sub-classes will suffer the dilution of the Underwriters’ stake. The 10-K doesn't provide the information and I don't see it among the documents filed on or after 3/28/13. There is also no explanation why the report of the stipulation wasn’t filed in the 10-K stipulation. I doubt the omission was accidental.

Ps and Ks are held mostly by retail investors while most TPS are held by institutions, including hedge funds. For example, David Tepper (Appaloosa Management LP) holds 850,000 TPS (8.5% of the total residual) and Jonathan Savitz (Greywolf Captial Management LP) holds 875,000 TPS (8.75% of the total residual); combined, these two men a total of 43% of the TPS (i.e., $1.725B/$4B). In addition, hedge funds that were affiliated with them during the period before the plan was confirmed also own large percentages of TPS. It is generally believed that nearly 100% of TPS are in the hands of hedge funds.

As previously stated, commons/Qs are disinterested in this matter because they are Class 22.

Tepper and the leaders of three other hedge funds (Centerbridge Partners LP, Aurelius Capital Management, LP, and Owl Creek Asset Management, L.P.; collectively, the “Settlement Noteholders” or “SNs”) were the architects of the plan of reorganization and it was only after a very lengthy battle with the Equity Committee (the “EC”) that retail equity was able to negotiate a recovery under the plan. I believe hedge funds affiliated with Jonathan Savitz (the “Trust Preferred Securities Consortium” or “TPSC”) and Texas Pacific Group (led by investor David Bonderman; “TPG”) are, as fellow institutional legacy, their post-confirmation allies.

The Liquidating Trustee, William Kosturos, while charged with protecting the interests of all legacy was closely associated with WMI during the battle I described, and though the former EC chair, Michael Willingham, sits on the LT’s Trust Advisory Board (“TAB”), Willingham owns only legacy Qs so is financially disinterested in Class 19. Finally, Douglas Southard, a holder of Ps, sits on the TAB as well, but I don’t believe his mere presence is enough to insure Ps and Ks are treated fairly in this matter.

If the Underwriters' $72MM comes from TPS (the majority of which are owned by hedge funds), only, then Ps and Ks (a large percentage of which are owned by retail) will be unaffected. In my opinion, this is the ONLY equitable outcome for legacy retail because the EC was disbanded by the time the Underwriters' negotiated their settlement, so that transaction was managed by some of the very people who tried to eliminate retail (i.e., Tepper and the other SNs), and who should not be trusted to fairly represent retail's interests in this matter, especially when it is in their financial interest to assign most or all of the Underwriters’ claim to the Ps and Ks. Moreover, I have no reason to believe that the two members of the Trust Advisory Board representing legacy retail -- Willingham and Southard -- had anything to say about the matter. Even if they did, again, despite his fiduciary duty as a TAB member, Willingham is financially disinterested as he owns no legacy preferred, and I consider him to be the senior partner in the Willingham-Southard team. Further, in my opinion, the TAB is just window dressing for Tepper, Savitz, et al., the people who control Kosturos.

Again, in my opinion the 10-K announcing the Underwriters' claim deliberately omits particulars about which variety or varieties of preferred will be diluted in favor of the Underwriters. I believe this omission was made so that after the case is closed institutional legacy (i.e., the SNs, TPSC, and TPG) can assign some or all of the $72MM to the variety or varieties of preferred to which they have the least exposure (i.e., to exclude or give a minority position to TPS).

For example, imagine the following hypothetical cases where the $72MM is divided as follows:

(a) $36MM to Ps and $36MM to Ks; or
(b) $720K (.01) to TPS, $71.28MM (.99) split evenly between Ps and Ks.

Such apportionment would be patently unfair to Ps and Ks. Therefore, assigning values of .0($72MM) to Ps and Ks ($0/$3.5B) and 1.0($72MM) to TPS ($72MM/$4B) is the only equitable way to apportion liability for the Underwriters' claims which, in my opinion, was (a) a sweetheart payoff from the institutional legacy (SNs, TPSC, and TPG/Bonderman) to the Underwriters (probably to get liquidity from the Underwriters for the hedge funds' plans for the LT's beneficial interests (more on this later)) and (b) made without adequate representation for retail legacy preferred.

I have read the trust agreement (http://www.kccllc.net/documents/8817600/8817600120507000000000001.pdf) and there is nothing within it expressly prohibiting (a) or (b), and either would be grossly unfair to legacy retail preferred, which, again, was not represented during the settlement negotiations with the Underwriters as the EC was disbanded at confirmation. In my opinion the UST is the only truly disinterested party that can fairly represent legacy retail preferred at this point.

Accordingly, I hereby request that the UST (1) bring a motion to assign the Underwriters’ interest exclusively to TPS’ portion of the preferreds’ recovery, and (2) object to entry of a Section 350 order closing the case until the court makes a ruling on this matter.

2. Obtain a Court Order (a) Requiring the LT to Disclose the Existence, Purpose, Location, Ownership, and Principals of any Entity (i) Acting in a Custodial Capacity With Respect to Assets in Which the LT has a Legal or Beneficial Interest, or (ii) Involved, Directly or Indirectly, in a Transaction Involving Assets in which the LT has a Legal or Beneficial Interest, and Full Particulars of Such Transaction, and (b) Prohibiting Any Transaction Directly or Indirectly involving Assets in Which the LT has a Legal or Beneficial Interest the Result of Which Would (i) Return Only Principal and Interest to the LT, or (ii) Provide any Legacy Interest Holder a Direct or Indirect Financial Benefit Greater Than What that Legacy Interest Holder Would Receive if the Legacy Interest Holder Received Only Financial Benefits Disbursed by the LT.

The LT’s stated mandate is to liquidate and disburse legacy property. The Global Settlement Agreement executed by WMI, JP Morgan Chase, and the FDIC forms a key part of the plan of reorganization and does not release the FDIC from claims against the FDIC as receiver with respect to the receivership.

Not one word has come out about any possible settlement (or even discussions, for that matter) on the foregoing but lawyers do not insert exceptions without reason.

Accordingly, I and many other legacy interest holders feel that it is possible that some recovery could come to the LT from the FDIC; possibly in the form of illiquid assets that were never under the jurisdiction of the FDIC. This is entirely speculative, but the possibility that no such assets may appear is irrelevant. Protection must be in place for legacy retail and there is currently no such protection from possible machinations by institutional legacy interests.

We are particularly fearful that the institutional legacy interests who control Kosturos will contrive to strip legacy retail of future capital appreciation of legacy assets. Specifically, I can envision a scenario where assets currently under the direct or indirect control of the FDIC are released to a DST entity owned by the LT and that DST entity engages in one or more total return swaps in exchange for interest and principal, but no capital appreciation where the counterparty in these total return swaps is an entity or entities controlled by Tepper, Savitz, TPG, and other institutional legacy who could absorb all capital appreciation at the expense of legacy retail.

Again, our concern is that the particulars of any such transactions will only be disclosed after the bankruptcy case has closed when there is no bankruptcy court or UST oversight.

Accordingly, I request that the UST make a motion for an order:

(a) requiring, within ten (10) business days of discovery of their existence, disclosure of full particulars of any legacy assets in which the LT has a legal or beneficial interest including their character, value, whereabouts, and identities of persons or entities serving in any custodial capacity;

(b) prohibiting use (however described) of such assets in any transaction the result of which would return to the LT (i) only principal and interest, (ii) substantially less than 90% of the full economic benefits of such assets, or (iii) provide any legacy interest holder a direct or indirect financial benefit greater than what the legacy interest holder would receive if the legacy interest holder received only financial benefits disbursed by the LT;

(c) conveying, directly or indirectly, any economic benefit to any entity owned, controlled, or affiliated with David Tepper (Appaloosa Management LP), Jonathan Savitz (Greywolf Captial Management LP), Mark Brodsky (Aurelius Capital Management, LP), Mark Gallogly (Centerbridge Partners LP), Jeffrey Altman (Owl Creek Asset Management, L.P.), David Bonderman (Olympia/Texas Pacific Group), and their respective partners, members, principals, and affiliates, that does not convey the same economic benefits to other legacy interests holders and in the same proportion as their respective proportions of the legacy assets; and

(d) requiring a ruling on the forgoing as a prerequisite for a Section 350 order closing the case.

We legacy retail need the protections described herein to prevent the foregoing persons and entities from circumventing the clear intent of the plan of reorganization’s intent that ALL legacy interest holders would receive the same economic benefits from the legacy assets. None of the protections requested herein contravenes the plan; they merely close loopholes in the plan that can result in great inequity to legacy retail.

Respectfully,


[Your Name]
Holder of [Class 19] [Class 22] Interests


Cc:

T. Patrick Tinker, Esq.
Assistant United States Trustee
Office of The United States Trustee
844 King Street
Suite 2207
Lockbox 35
Wilmington, DE 19801

Charles Edward Smith, Esq.
Executive Vice President, General Counsel and Secretary
1201 Third Avenue, Suite 3000
Seattle, Washington 98101
[e-mail]