LTI's AS PER DS
Disclosure Regarding Potential for Distributions of Liquidating Trust Interests
to Holders of Allowed Subordinated Claims (Class 18) and to Holders of
Preferred Equity Interests (Class 19), Dime Warrants (Class 21) and Common
Equity Interests (Class 22)
As discussed in more detail elsewhere herein, the Seventh Amended Plan provides that in
the event that all Allowed Claims (other than Allowed Subordinated Claims), and Postpetition Interest
Claims and Intercreditor Interest Claims in respect of such Allowed Claims, are paid in full, the
Liquidating Trust Interests will be redistributed, and holders of Allowed Subordinated Claims (Class 18)
will be entitled to receive their Pro Rata Share of such interests. As set forth in the Updated Liquidation
Analysis attached hereto as Exhibit C, the Debtors estimate that holders of Allowed PIERS Claims (Class
16) will receive a distribution of approximately $94 million pursuant to the Seventh Amended Plan. As
set forth in Section III.B.6.g hereof, the maximum possible recovery for holders of Allowed PIERS
Claims is approximately $250 million, such that the Debtors estimate that there will be a shortfall with
respect to recovery for holders of Allowed PIERS Claims in the amount of approximately $156 million.
In addition, the Debtors estimate that there will be remaining claims of approximately $40 million of
Remaining Postpetition Interest Claims with respect to the Floating Rate Senior Notes, as well as
approximately $11 million of Postpetition Interest Claims on account of Allowed General Unsecured
Claims. Accordingly, for Liquidating Trust Interests to be redistributed to holders of Allowed
Subordinated Claims pursuant to the Seventh Amended Plan, the amount of net Cash proceeds available
for distribution from the Liquidating Trust would have to be approximately $207 million greater than
currently estimated by the Debtors.
The Seventh Amended Plan further provides that, subject to granting the releases set forth
in the Non-Debtor Release Provision (Section 41.6 of the Seventh Amended Plan), in the event that all
Allowed Claims and Postpetition Interest Claims in respect of Allowed Claims are paid in full (including
with respect to Allowed Subordinated Claims), (i) each holder of a Preferred Equity Interest, including,
without limitation, each holder of a REIT Series, will be entitled to receive such holder’s Pro Rata Share
of seventy percent (70%) of, and (ii) holders of Dime Warrants in Class 21 and Common Equity Interests
in Class 22 will be entitled to receive such holders’ Pro Rata Shares of thirty percent (30%) of (to be
shared on a pari passu basis between these two Classes), among other things, any Liquidating Trust
Interests to be redistributed; provided, however, that, in the event that, at the Confirmation Hearing and in
the Confirmation Order, the Bankruptcy Court determines that a different percentage should apply, the
foregoing percentage will be adjusted in accordance with the determination of the Bankruptcy Court and
be binding upon each Equity Interest holder.
Thus, pursuant to the Seventh Amended Plan, all Allowed Subordinated Claims must be
satisfied in full prior to redistribution of Liquidating Trust Interests to holders of Equity Interests. The
ultimate amount in which Subordinated Claims in Class 18 will be allowed is unknown and any estimate
at the current time would be highly speculative. Claims that are or potentially will be classified in Class
18 include, among others, the following: Certain Claims filed by holders of WMB Notes. For example,
pursuant to the Motion of Debtors for an Order Pursuant to Section
Group, dated December 28, 2011 [D.I. 9279], the Debtors seek approval of a stipulation with certain
holders of Misrepresentation Claims related to WMB Notes pursuant to which the Debtors have agreed
that such holders will be deemed to hold Allowed Subordinated Claims in the amount of $15 million.
(See Section V.B.5.g hereof.) The hearing on said motion is scheduled for January 19, 2012.
Certain additional Claims either are or could be classified in Class 18, but are disputed on
the basis of, among other things, validity, amount, and/or appropriate classification. For example,
pursuant to that certain Stipulation Resolving Debtors’ Amended Thirty-Second Omnibus (Substantive)
Objection With Respect to Claim Nos. 3812 and 2689 [D.I. 6068], dated November 23, 2010, by and
among, among others, the Debtors and the Policeman’s Annuity and Benefit Fund of the City of Chicago
(defined in Section V.B.6.g below as “Chicago PABF”) and Doral Bank Puerto Rico (defined below as
“Doral Bank”), as lead plaintiffs, on behalf of a putative class, in the consolidated putative securities class
action entitled Boilermakers National Annuity Trust Fund v. WAMU Mortgage Pass Through Certificates
Series ARI, Case No. 09-0037 (MJP) (the “Boilermakers Plaintiffs”), the parties thereto agreed that
certain Claims filed by and on behalf of the Boilermakers Plaintiffs would be withdrawn, without
prejudice to the re-filing of such Claims in the event that a plan was filed that would provide recovery to
holders of Allowed Subordinated Claims. Certain Boilermaker Plaintiffs argue that they are now
permitted to refile their Claims because the Seventh Amended Plan provides for a conditional distribution
to holders of Allowed Subordinated Claims. In the Boilermaker Plaintiffs’ objection to this Disclosure
Statement [D.I. 9316], filed January 4, 2012, the Boilermaker Plaintiffs asserted that they are entitled to
re-file their Claims as General Unsecured Claims rather than as Subordinated Claims. In said objection,
the Boilermaker Plaintiffs argue that their proposed re-filed claim, if allowed, “will be in the hundreds of
millions of dollars.”
In addition, certain directors and officers filed indemnification Claims against the
Debtors that the Debtors have objected to, arguing that such Claims should be disallowed and, in the
alternative subordinated to Class 18. (See Debtors’ Sixtieth Omnibus Objection (Substantive) to Claims
(Claim Nos. 2108, 2240, 2241, 2246, 2247, 2248, 2604, 2606, 2631, 2633, 2634, 2635, 2636, 2637, and
3242) [D.I. 5970], dated November 17, 2010.) In the context of the Estimation Motion (defined and
discussed in Section V.B.5.h hereof), pursuant to which the Debtors have asserted that $0 should be
reserved for said director and officer indemnification Claims, certain director and officer claimants have
argued that at least $100 million must be reserved for such claims.
In addition, the Creditors’ Committee has filed a motion [D.I. 9301], in which the
Debtors have joined [D.I. 9302], requesting that the Bankruptcy Court alter or amend its December 20,
2011 opinion and order, discussed in Section V.B.6.k hereof, ruling that the Debtors have not stated a
basis for subordination of the Claim filed by Tranquility (defined below), which Claim was filed in the
amount of approximately $49.6 million.
In addition, pursuant to the Order Approving Stipulation Between Claimants Credit
Suisse Securities (USA) LLC, Goldman, Sachs & Co., and Morgan Stanley & Co., Inc., and the Debtors
Resolving the Twenty-Ninth Omnibus Substantive Objection to Claims Pursuant to Section 510(b) of the
Bankruptcy Code [D.I. 6687], dated February 4, 2011, the Bankruptcy Court approved a stipulation
pursuant to which the Debtors agreed that certain underwriters’ Claims are classified in Class 18 as
Subordinated Claims, but reserved the right to object to such Claims.
105(a) of the Bankruptcy Code and
Bankruptcy Rule 9019, Approving Stipulation and Agreement by and Among the Debtors and the G&E
AI
