Subordinated claims will be paid prior to any distribution to former holders of equity interests in WMI.
Trust Beneficiaries who were projected to receive value on account of their Allowed Claims against the Debtors have been issued LTIs evidencing their right to receive distributions from the Trust if, and to the extent, sufficient cash is available with respect thereto. If and when distributions from the Trust become available to Trust Beneficiaries who have not received LTIs to date, additional LTIs will be issued to such Trust Beneficiaries in accordance with the Plan and the distribution priorities that are summarized in Annex C of the Trust Agreement.
Pursuant to the Plan, holders of claims in Class 18 (“Subordinated Claims”) will receive distributions before the holders of claims in Classes 19, 21 and 22 (the former holders of equity interests in WMI (“Equity Interests”)). As of December 31, 2018, outstanding allowed Subordinated Claims totaled $38.2 million and $8.4 million of post-petition interest. In addition, during the Debtor’s bankruptcy proceedings, the Bankruptcy Court ordered that certain Class 17B claims (defined in the Plan as WMB Subordinated Notes Claims) be subordinated to the level of Class 18. Such Class 17B claims remain disputed and unliquidated. The allowance of any Subordinated Claims (including WMB Subordinated Notes Claims) would affect the amount, if any, of distributions that would otherwise be available to the holders of Equity Interests. For additional information regarding these matters, see Item 3 of this Form 10-K under “WMB Subordinated Debt Misrepresentation Claims.”
Furthermore, and as discussed in more detail in Item 3 of this Form 10-K under “Mortgage Pass-Through Litigation”, the Bankruptcy Court has indicated that it will allow one Claimant to re-file its proof of claim as either a General Unsecured Claim (as defined in the Plan) or a Subordinated Claim, as determined by the Court, when recoveries become available to holders of Subordinated Claims. On February 25, 2019, the Trust initiated a distribution of approximately $50.0 million to LTI Holders. After giving effect to such distribution, LTIs in Tranche 4 (as defined below or the Plan) were paid in full. As a result, the Trust believes that the aforementioned Claimant is now permitted to re-file its proof of claim. Any such re-filing, and the ultimate resolution of any such claim (including the priority status thereof), may affect the amount, if any, of distributions that would otherwise be available to holders of Subordinated Claims, as well as holders of Equity Interests.
Based on currently projected values for the Trust Assets, the amount of allowed and disputed Subordinated Claims and costs associated with administering the Trust, management currently believes it is unlikely that the Trust will make any cash distributions to holders of Equity Interests.
