The LTW agreement originally required payment of $.01/LTW to convert. That was eliminated as part of the Wamu/Anchor merger. So there's no "purchase" and the question is solely whether the LTWs, at the time of bankruptcy, meet the bankruptcy definition of "equity" or "debt."
Under the Bankruptcy Code, an “equity security” means:
(A) share in a corporation, whether or not transferable or denominated “stock” or similar security;
(B) interest of a limited partner in a limited partnership; or
(C) warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share, security, or interest of the kind specified in subparagraph (A) or (B) of this paragraph.
11 U.S.C. § 101(16) [emphasis added].
Under the Bankruptcy Code, a “debt” means a liability on a claim. 11 U.S.C. § 101(12). A “claim” means:
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured;
11 U.S.C. § 101(5)(A) [emphasis added].
So are the LTWs "equity securities" or liabilities on a claim (e.g., debt)?
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