Mr Cooper Group Inc (COOP)

[JohnnyWinter]

"24. The Debtors are currently insolvent. The Debtors' financial position subsequent
to the loss of their primary operating asset, WMB, is reflected on their schedules filed with this
Court which indicate $4.48 billion in assets and $7.83 billion in liabilities. This reality is further
bolstered by the presumption of insolvency afforded debtors pursuant to section 553 of the
Bankruptcy Code for the 90-day period immediately preceding the petition date See 11 U.S.c. §
553(c). It is the setoff applicant's burden to establish otherwise. In re Balducci Oil Co., 33 B.R.
847, 850 (Bankr. D. Colo. 1983). Although the Debtors have asserted claims to certain assets such as trust preferred securities and prospective tax refunds, both JPMC and the FDIC have
asserted claims against the Debtors for more than the total amount of such assets.

Further,
more than $100 billion in claims have been filed against the Debtors' estates in these chapter 11
cases. While a significant portion of these will not likely be allowed, they are further evidence
that the Debtors are currently insolvent and would be at the time of any exercise of Section 9.5.
Therefore, invocation of Section 9.5 would consist of a postpetition procurement of a debt of the
sort that section 553(a)(3) of the Bankruptcy Code prohibits from forming the basis for any
setoff."

Now I know where they are going with the section 9.5 argument, but the following item is what should be considered troubling to shareholders imo.

38. The further delay imposed on the Debtors threatens to derail the Debtors' chapter
11 cases. The $4 billion in Deposits are significant estate assets CRITICAL to the Debtors chapter 11
process. The recent amendments to the Bankruptcy Code impose a HARD DEADLINE of March 10,
2010 on the Debtors' exclusive period to file a chapter 11 plan. If the Debtors recover the
Deposits from JPMC, they will be well-positioned to file a plan in advance of their exclusivity
deadline. Without the Deposits, however, the Debtors will not be able to construct a viable plan
BENEFICIAL TO THEIR CREDITORS."


http://www.kccllc.net/documents/0812229/0812229091112000000000001.pdf


I understand that it is possible that additional value could be added to the estate in the form of refunds, nols, and other claims, but even with the deposits and the tax refunds, I just don't see the common shares staying alive.


Do I think IF WMI gets the money in "the deposit" that they are going to give it all to the creditors?

Of course I don't think they'll do that. I think they will issue new stock and pay their creditors in part cash and part new paper so they have some cash left to operate as a viable business. New stock means wamuq shares will be cancelled, and that my friend, is part of the beauty of chapter 11 reorganization from a company's perspective. Wipe out the shareholders, preserve as much cash as possible, make creditors whole, and start with a fresh, clean slate.

Even if WMI gets its assets up to $11.3 billion and ends up with the same liabilities of $7.83 billion, that wouldn't even be enough to "cover" preferreds and not commons, but imo, they could wipe out the preferreds too if they did it right.

(also, people might want to learn what the following really means):

"Assuming that the Conditional Exchange had been completed in accordance with the terms of the relevant
documentation, on a pro forma basis, WMI’s financial statements would reflect (a) a credit to shareholders’
equity of approximately $3.9 billion upon issuance of the new classes of preferred stock; (b) an investment in
subsidiary (i.e. WMB) of approximately $3.9 billion upon contribution of the Preferred Securities by WMI to
WMB; and (c) an immediate and corresponding write-down of such investment in subsidiary."

I would love to hear your comments on these thoughts.