Mr Cooper Group Inc (COOP)

[Large Green]

FROM CSNY/Alice Griffin - Update and Future Legacy Interest Protection Efforts


Status of the Appeal


On March 23rd the Third Circuit rejected my rehearing en banc request. This initiated the 90-day window for a petition for certiorari to the U.S. Supreme Court. However, the Supreme Court has extended that deadline due to Covid to 150 days, so the petition deadline is August 20, 2021


(https://urldefense.com/v3/__https://www.supremecourt.gov/orders/courtorders/031920zr_d1o3.pdf__;!!O8JL6HM!w4OLXBXx_iBdCLZiVgiIwhEM4SABodZYJPFCc8yLZP97h1EKQvg5GXVNRkLOX8OhZA$ ).


I informed the Trust’s counsel of the foregoing as well as my intention to file a petition. The Trust cannot be dissolved until all litigation ends.


While the petition to the Supreme Court is a long shot (about 5% of petitions that are not forma pauperis (i.e., the petitioner didn’t pay the required fee) are granted) it is worth it to Class 19 both economically and as a means of showing the enemies of retail our capacity for resistance going forward. (I don’t say this blithely, as I believe my personal security is at risk from the parties controlling the 70% of legacy interests not held by retail investors. Considering the magnitude of the money at stake here, the lack of individual accountability functioning as a group affords may tempt some of them to consider removing a human impediment.)


Specifically, and as for the Underwriters, given the magnitude of their financial stake even a 1% risk of loss of Class 19 status is real as any lawyer worth his sheepskin will tell them. Once the petition is filed a response other than an outright rejection (e.g., reversal without hearing, vacating) is possible and just as disastrous to them as a grant of certiorari. In other words, once the petition is filed everything needs to go right for the Trust and the Underwriters.


Future Shareholder Protection Efforts


Based on statements made to me I believe many legacy shareholders don’t understand the serious nature – both economic and legal – of what the Trust did by granting the Underwriters Class 19 interests. (Again, this was done after retail lost its legal counsel, Susman Godfrey.) I suggest people apply reason to the questions why the Underwriters have resisted: (1) relinquishing ‘worthless’ interests; and (2) any suggestion of voluntarily moving to Class 22. Obviously, they expect a very large return on their holdings.


I’ve written before about the impact of a sizeable recovery of WMI’s assets and some things bear repeating. I believe Morgan Stanley bought E*Trade to obtain its WMI legacy interests, and by so doing obtained 16% of the $3 billion in face controlled by retail. It closed on that deal the same week Schwab closed on TD Ameritrade; a deal that gave Schwab 61% of retail’s $3 billion. Throw in the 16.33% of the $3 billion owned by Fidelity and you see that three (3) brokers control 90% of retail’s holdings. I doubt control of such wealth by a mere 5,000 retailers (holders of Ps and Ks combined) has ever occurred before. We are considered ‘dumb money’ by the private wealth managers and, as I discussed with a lawyer who has worked for several of them, they will try to get as large an annual percentage of our money as they can without incurring legal jeopardy.


It is for this reason that within the past year I’ve reached out to professionals who could represent our interests after the money comes in. My four (4) areas of initial concern for retail during this post-disclosure period are:


(1) insuring retailers receive the best prices for products and services from wealth managers;


(2) fair valuation of any illiquid WMI assets (Tepper et al. cannot be trusted);


(3) reviewing offers of products and services as to suitability (i.e., an offer to sell all holdings to a broker v. an offer to borrow against them at a reasonable interest rate so even shareholders with very modest holdings can ride the investment to the end); and


(4) recovery of any escrows/legacy markers seized by or allegedly forfeited to brokers.


This team of professionals would be selected by us as a body and would work for our ombudsman who would interface with the powers that emerge after WMI’s assets are disclosed. The professionals and the ombudsman would be compensated by the banks out of the fees negotiated by the ombudsman on our behalf. The ombudsman would be someone unafraid of the banks and hedge funds, and who is fiercely devoted to fighting against unfairness and has sympathy for little guys. Sitting just below the ombudsman would be a council of legacy retail who would confer as necessary periodically with the ombudsman and voice investors’ concerns. Unless a retailer has a particular concern, there would be no need for disclosure of any investor’s information to the ombudsman. In many ways this alliance would function so an investor would approach the ombudsman as he would his elected federal or state representatives.


This leads me to another matter we’ve discussed: who will be allowed to participate in a private equity deal taking WMI’s assets private. Given the Settlement Noteholders’ initial intent to take what eventually became Mr. Cooper private, as well as their aversion to retail in general and the SEC’s limits on participants in certain private investments, I thought holders of smaller amounts of legacy interests (e.g., someone with 100 Ps (i.e., the equivalent of $100,000 face)) would not be allowed to participate. I’m now of the opinion that the brokers themselves would fight against such exclusion.


The brokers’ fantasy is to relieve holders of their valuable legacy interests at low prices, if possible. This is probably impossible, so the next best thing for them to do is to aggregate all WMI legacy interests so that even the smallest holders can participate and grow their stakes dramatically over the next few years with the banks charging high fees on these newly wealthy clients. Further, by fighting to get them included the banks will have proved their loyalty. LOL. Accordingly, I think the banks will play the long game and let all the little guys in so they can fleece them over many years and probably generations. This ‘No Client Left Behind’ scheme is the wiser course lest competitors use it to lure holders of relatively small stakes (e.g., if Schwab (or even Citi or Wells Fargo) did this because Morgan Stanley refused to then those small E*Trade legacy stakes would walk out the door). If the foregoing materializes each private equity interest will be controlled by a broker so the powers only have to interact with brokers, which is cheaper, entails less legal and compliance risk, and doesn’t require them to interface with the hoi polloi.


I understand that many who read this board have large legacy holdings and may feel they do not need representation either because they already have wealth management or because they think they can handle matters on their own. Such persons should consider that the Settlement Noteholders and the TPS group (e.g., Jon Savitz’s group) will stick together and their combined holdings dwarf retail (e.g., Tepper and Savitz alone control $1.725 billion of face; just under the amount of legacy holdings at Schwab). I am particularly concerned about their valuation of illiquid assets, if any. In my opinion these leopards will not change their spots. Unless they and the wealth managers fear retail as a group they will exploit retail.


Anyone interested in serving or nominating someone to serve should PM me or reach out to me at: [e-mail]. We will have a roadshow to introduce the professionals to investors so they can meet them before committing to the alliance. As to commitment, all that will be required will be a memorandum of understanding (which by definition is non-binding). Positive identification and a brokerage statement evidencing WMI legacy interests (redacted as to quantity) and a notarized affirmation that the brokerage statement is not fraudulent would probably be adequate for providing eligibility. As previously stated, joining the alliance will be free.


Finally, I know some of you are hostile to my decision to exhaust my legal remedies. My response is that my portion of the money coming to us is a large sum, very significant to me and my family, and I have no intention of relinquishing any portion of it unless forced to do so. No one here is going to replace the money I will lose if the Underwriters remain in Class 19 and given reports I have received very few people here would be able to write a check for either the initial or ultimate value of their portion of the money lost to the Underwriters. (Also remember that Morgan Stanley/E*Trade has the largest portion of the Underwriters’ $72 million claim in Class 19.) Accordingly, though I am sympathetic about people’s individual concerns, I am resolute. If you want to hurry things along, reach out to Tepper and the other three Settlement Noteholder heads and Jon Savitz.