Mr Cooper Group Inc (COOP)

[ron_66271]

The “Stipulation with Underwriters” From Q&A

24. What is the “Stipulation with Underwriters” and how does it affect my interests, if any, in the Trust?

Certain underwriters (including Morgan Stanley, Credit Suisse, and Goldman Sachs) filed indemnification claims against the estate for legal fees and settlement costs incurred in defending securities fraud action claims brought against them in connection with their role underwriting various WMI pre-petition security issuances (both debt and preferred equity) pursuant to indemnification provisions in their engagement letters. In the aggregate, they settled the securities fraud claims for approximately $88 million and incurred approximately $7.5 million in legal costs. Relatively early on in the chapter 11 cases, the Bankruptcy Court approved the subordination of these claims. As a result, they are included in Classes 18 and 19. WMILT reserved its rights to object to this claim on other bases in the event value was recovered by members of Class 18 and/or 19. Because Class 19 received a distribution of Reorganized WMI common stock in connection with the Initial Distribution, the parties began preparing to litigate the merits of the underwriters’ claim. Such litigation was expected to take the form of a quasi-trial on the securities fraud claims. After consideration, rather than incur potentially significant legal costs in connection with such litigation, WMILT negotiated what it believed (and continues to believe) to be a favorable resolution of the underwriters’ claim which minimized cash payments prior to any potential additional distributions to former equity holders. The principal financial terms of such settlement included: * The $24 million Class 18 claim was disallowed in full, resulting in no cash distributions on account of such claim; and * The $72 million Class 19 claim was deemed allowed, representing only 1% of Class 19. Based on trading prices at the time of the settlement, the value of the prospective stock distribution was approximately $1 million. Reorganized WMI common stock was reserved at the time the settlement was consummated.

WMILT believes that executing the settlement with the underwriters was in the best interests of the Trust and its beneficiaries. In particular, it removed $24 million of potential claims that would have to be paid prior to any funds becoming available to former equity holders and did not require any additional cash outlay.

In accordance with, and as contemplated by, Section 6.2 of the Liquidating Trust Agreement, the terms of the settlement with the underwriters were not submitted to the Bankruptcy Court for approval. Nevertheless, the principal terms of the settlement with the underwriters, including the effect thereof, were first disclosed in the Trust’s Form 10K for the period ended December 31, 2012, which was filed on April 1, 2013, only four days after the settlement was finalized. It was further disclosed in subsequent Quarterly Summary Reports filed with the Court and under Form 8-K as well as subsequent 10-K’s. The stipulation memorializing the underwriters’ settlement is appended to these FAQs FN 3 as Exhibit A.

Footnote 3;
3 Note that the provision in such stipulation contemplating bankruptcy court approval of the settlement was waived by the parties.

http://www.kccllc.net/documents/8817600/8817600190415000000000001.pdf