1)JPM did a Whole-Bank P&A, which meant it acquired both the assets/liabilities and basically bought the entire bank. In light of this the Anchor Litigation should probably be transferred to it.
2)JPMorgan Chase also assumed the qualified financial contracts which were outstanding against Washington Mutual.
3)(i) QUALIFIED FINANCIAL CONTRACT.--The term "qualified financial contract" means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar agreement that the Corporation determines by regulation, resolution, or order to be a qualified financial contract for purposes of this paragraph (Source FDIC Website)
4)The warrant agreement would qualify as a QFC.
5)From the Disclosure Statement:
"Pursuant to the Proposed Global Settlement Agreement and sections 363 and 365 of the Bankruptcy Code, WMI will be deemed to have sold, transferred and assigned to JPMC any and all right, title and interest it may have in the Anchor litigation, free and clear of any liens, claims, interests and encumbrances, including, without limitation, any liens, claims, interests and encumbrances of holders of the LTWs, and the FDIC Receiver and FDIC Corporate will be deemed to have waived and released any and all rights and claims associated with the claims, causes of action, damages, liabilities and recoveries associated with the Anchor Litigation."
So JPM is basically asking the FDIC to repudiate the warrant agreement. The problem is that if it does, The FDIC then becomes liable for damages:
"Damages. The FDIC is not permitted to repudiate a QFC without compensating the counterparty for the counterparty’s actual direct damages. A counterparty is entitled to receive the normal and reasonable costs of cover or some other industry equivalent, calculated as of the date of repudiation or disaffirmance. However, a counterparty may not receive more than it would have received on liquidation of the depository institution’s assets."
So what this means is that if FDIC repudiates the warrant agreement they could end up paying 2X...Once to JPM and then to warrant holders.
6)Its too late to repudiate the contract:
"TIMING OF REPUDIATION.--The conservator or receiver appointed for any insured depository institution in accordance with subsection (c) shall determine whether or not to exercise the rights of repudiation under this subsection within a reasonable period following such appointment."
"The FDIC shall have a reasonable period of time, generally, no more than 180 days from the date of appointment of the FDIC as conservator or receiver for an institution, to elect whether to redeem or prepay, by repudiation or otherwise, secured obligations of the Institution."
Window is closed...If they havent done it by now they cant do it
For this reason I expect the Anchor Ligitation, to be transferred in its entirety (with a new amended warrant agreement) to JPM. At least this way JPM stands to get 15% of the litigation proceeds
SO AS BUD FOX WOULD SAY, "PUT YOUR BEST CLIENTS INTO IT"
