Washington Mutual WAHUQ Trust Prf (fka WAHUQ)

[marayatano]

Do you have any thoughts on how the senior bonds droped based on the FJR news and the WAHUQ droped as well. One or the other should have dropped, not both?

Strictly my thoughts/opinion:

Seniors dropped because the amount of recovery at the very MAX from the estate is principal plus federal judgment rate. Previously, it was principal plus contract rate. That is the reason for the drop and readjustment in price to reflect FJR. (I didn't check the price of the bonds, but I am sure they are probably slightly below principal plus FJR)

HUQ's drop was because of the same reason, MAX from the estate is principal plus federal judgment rate. Previously, it was principal plus contract rate, however, HUQ has a subordination clause that was entered PRIOR to WMI filing BK protection. This subordination clause guarantees the Seniors that any deficit in their recovery plus interest (contract).

Recovery for seniors will come from the junior securities, i.e., HUQ after the effective date of BK confirmation provided that the seniors pursue the clause, which is expected.

Once the HUQ pays the deficit to seniors, HUQ canNOT come back the the BK estate for more recovery because they already got paid in full in the eyes of the BK court and the funds available for distribution has already been distributed. HUQ in turn will be left w/ a deficit.

While this BK continues to drag on, contract interest continues to accrue and HUQ's recovery continues to deplete. Time is not on HUQ's favor provided that mediation is a bust and there is no settlement.

That is why both seniors and HUQ dropped.

There are some other variables that come into play here that I did not touch on: Insider trading, mediation (settlement), dis-allowance of claims of hedgies (they own approx. 70% of the entire float of HUQ), etc.

That is the brief jist of it.

NOTE: Mediation "might" produce something different, but who knows but the insiders.

My opinion only since you asked.

I have to get back to work. Good day.