I'm somewhat more optomistic. As I've said before, DIMEQ can win in 2 ways: if we are classified as a "Class 12" creditor or if equity wins. Let's look at where we stand with each of these.
At the adversary hearing on Dec. 1, the judge asked some tough questions of Silverstein (Broadbill) in particular. Steinberg rocked, but Silverstein had a hard time pursuading the judge that a warrant was not, on its face, a form of equity. That being said, Sonterra (Robert Scott?) then followed Silverstein with an excellent explanation of how the LTWs were created and how they work. The judge had few questions there if I'm remembering right.
I haven't reviewed the case, but my impression at the time was that the judge had not yet had a time to read the most recent briefs. In particular, I don't think she'd had a chance to review materials provided by Sonterra, and she absolutely had not seen Sonterra's "Statement in Support of the Objection to Confirmation filed by Class Plaintiffs," as this wasn't filed until 12/6.
So in the end, it's great that the judge deferred her decision re: the motion for summary judgment until she decides what she's doing about the POR, because by then she'll have had the chance to slog through all the briefs, etc. (or, more likely, she'll have her clerk make an initial slog and summarize and then she'll review the memo that is prepared and refer back to the briefs/memos/transcripts herself).
By now, it should be clear to everyone following this case that although the Adversary Proceeding is nominally proceeding on a separate track, it is inextricably interwoven with the confirmation process.
So the Sonterra brief will be taken into consideration, as will Smith's admission to Steinberg that Wamu consulted with Sullivan Cromwell concerning the interpretation of the LTW agreement. That is a critical concession, because in order to win on their motion for summary judgment, Wamu must show that there are no factual issues in play. By consulting with Sullivan Cromwell, Wamu has de factoadmitted that there is an ambiguity.
Then there's all the other information that came out about the document dump at the same time Weil filed the motion for summary judgment, the cabal of hedge funds that negotiated the POR, etc. In short, I'm feeling pretty good about surviving the motion for summary judgment and, if you read the Sonterra brief, you'll fully understand why I feel very good about our ultimate prospects. That being said, a court can do just about anything, so I certainly wouldn't presume that we'll be victorious regardless.
Ok, so that's the priority position. Let's look at the status of the equity. It's been said elsewhere that Wamu was performing a delicate balancing act when it put on witnesses without allowing discussions of case analysis. You can go back and read the trial transcript (it's included in the TPS motion in limine that I linked to a couple days ago). Basically, Kosturos and others said "well, we settled because the other side was suing us for some really big numbers." That's a pretty irrational basis upon which to settle a case, isn't it?
I won't re-hash the Boli/coli, NOLs, $4B deposit, etc., but suffice it to say that, in the end, the court must make an assessmenet as to the competency and candor of the witnesses in front of it. An opinion that focuses on those areas (as compared to legal conclusions of who owns what) is almost unappealable. So when I listened to the hearings (the parts I listened to), I know what I thought about the competency and candor of the witnesses, and frankly, I wasn't impressed. They couldn't answer basic questions, didn't appear knowledgable, and were unable to articulate objective bases for the decisions they'd made.
Regardless of who owns what, and there are plenty of questions there, I suspect there is ample ground to question the competence and veracity of the witnesses and their counsel. For example, the ownership of the Boli/coli, the negotiation of the settlement that occurred primarily before Quinn Emmanual was engaged, the lack of involvement by the Wamu board or, frankly, Kosturas' inability to say who was even on the board at present. These are real problems for witnesses.
This is my long-winded way of saying that if the court wants to take action, it has ample grounds to protect its decision from appeal (or, should I say, embarrasment) by cloaking it in an assessment of the witnesses themselves. The debtors failure to provide objective data leaves them totally at the mercy of the court. I might add that this is probably why the EC did not put PJS on the stand, or provide competing opinions as to valuation - because their position is undoubtedly that Wamu has not satisfied its burden of pursuasion that the valutions are appropriate. Remember that he Blackstone appraisal did not value the company as a going concern, even though there's a rights offering, messed with the NOLs, etc.
I suspect the court would be happy with a settlement among the affected parties, as a court usually is. That being said, as Steinberg noted, it appears that a "club" or "cabal" of hedge funds drove the settlement negotiations and froze out those who weren't with the in crowd. Until something happens to break the log jam, they'll stand pat, since they're already in the money.
Anyway, if I had to bet, a decision not to approve the POR would be a tough one, but all things considered, the court has ample basis not to approve, and I'd say there's a decent chance that will be the ultimate decision, with an eye for forcing the parties to negotiate a settlement.
I could, and likely am, wrong here, but those are my opinions.
And for those of you who slog through this post, kudos for your patience.
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