MOSH legal fees and the trust -
Here is my understanding of the situation. JPM is the Trustee of the MOSH Trust. MOSH Holdings LLC is the group that started the lawsuit. MOSH Holdings LLC is funding the lawsuit, and I believe they have stated that they are doing this on behalf of the unitholders.
On the other hand, you have the MOSH Trust, which started out 3 years with about $2M in reserves. Over the last 3 years, the $2M was used, and JPM loaned the trust $3M against the trust's assets. Now that $3M is just about gone, that's about $5M in 3 years for administrative expenses and JPM legal fees.
On the PXD side, PXD collects all the income from the lease properties with WD is now producing an estimated $400K/mt. If and when Nimitz comes on line, there might be another $300K/mt - but who knows when. This income stream has apparently being used to pay PXD legal fees (estimated in the 2nd CSA at $3M), and the $1.4M P&A charges assessed by PXD. So the Trust has been getting nothing. At the rate WD is producing income, PXD could be paid off by say - October. However, I think that PXD's legal fees would just expand to consume what ever amount of income that is available.
To me it appears that PXD has an effective block on any income getting into the trust (which would be used by JPM for administrative expenses and JPM legal fees), thus setting up the situation where JPM might be tempted to call the loan and take the assets (thus possibly terminating the Trust). How this would be viewed by the Judge, would be real interesting. Another thought of mine would be that JPM would take the assets, thus being able to keep the income from WD to fund their own legal fees rather than letting PXD use the income against their legal fees.
I think that this would not be viewed very kindly by the Judge. Especially if MOSH won the lawsuit, JPM would have to give the assets back, which might be difficult if they sold them. What I think would happen, would probably a lot of posturing and saying that they would do something, but JPM would probably do nothing and pay their own legal fees against a larger debt against the trust's assets (something they said that they would not do). PXD was paying their own legal fees prior to WD coming back on line.
If they (JPM) did anything else, I think that the Judge would probably get really upset. At one time there was an agreement that JPM/PXD would give 60 days notice before doing anything. Also, I believe that in the original lawsuit, MOSH LLC requested an injunction against JPM/PXD preventing them from terminating the trust and selling the assets.
Bottom line - its an interesting question that no one knows the answer to. So there is probably going to be a lot of bluster from JPM on this in the future. Since PXD had to carry the trust with their legal fees prior to WD's income stream, JPM would probably be forced to do the same. Its not like they are both paupers. Overall - probably a moot analysis. I think that the trust is relatively safe. The first indication that JPM/PXD were going to do anything against the trust, would have MOSH LLC going directly to the Judge for a protective standstill order.
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Just my views...
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