Dime Bancorp Inc (fka DIMEQ)

[ItsMyOption]

I think it would be helpful to read what Art wrote in his DS objection. It will have many clues on things that we may see addressed in what I expect will be an updated DS.


A.S. objection:
OBJECTION TO THE DISCLOSURE STATEMENT FOR THE SEVENTH AMENDED PLAN BY CLASS
REPRESENTATIVES OF THE DIME LITIGATION TRACKING WARRANTS

http://www.kccllc.net/documents/0812229/0812229111221000000000021.pdf

just part of his objection relates to allocation to shares if ruled equity.

A. The Disclosure Relating to the Disputed Equity Escrow
Is Inadequate and the Sharing Formula is Facially Wrong

8. The Disclosure Statement (page 40) states that until it is finally determined whether the LTWs are claims or equity, there will be a Disputed Equity Escrow set up for the LTW Holders. This equity escrow is in addition to the Disputed Claims Escrow of $337 million established for the LTW Holders.
9. The Debtors’ formula in the Plan as to how the 30% of the Reorganized WMI Equity is to be allocated between the common stockholders (Class 22) and the LTW Holders (Class 21) is opaque at best, and appears to be facially wrong. Of course, the issue is rendered moot if the LTW Holders are determined to be creditors, and not holders of equity interests in the Debtor.
10. At a minimum, the Disclosure Statement should have an example of how the sharing formula works in the event LTW Holders have a claim equal to the Disputed Claims Reserve of $337 million. Furthermore, the Plan should specify when the per share price of Common Equity Interests is determined, and how the market capitalization of the Common Equity Interests is determined, to the extent that these components are determined to be relevant for the sharing formula. With this information, equity holders will be able to see the full impact of the dilution in their distribution in the event LTW Holders are determined not to be creditors.
11. Moreover, the sharing formula in the Plan makes no sense. It appears to create a sharing formula based on converting $1 in Net Recovery (as herein defined) in the Anchor Litigation into $1 of the Debtors’ common stock.
12. As demonstrated at the trial in the Adversary Proceeding, it was the clear intent and purpose of the LTWs to give their Holders 85% of the net recovery in the Anchor Litigation (“Net Recovery”). The Net Recovery was effectively “spun out” for the benefit of the Dime shareholders and was not to be given to a future acquirer (WMI) or the future acquirer’s creditors. The LTW Agreement did not contemplate that there would be insufficient stock or other consideration to convey the Net Recovery to the LTW Holders. In other words, there was no concept of giving the LTW Holders a pro rata portion of the Net Recovery, in stock or anything else. Indeed, Section 4.4 of the LTW Agreement provides for a contrary result.
13. Barry Levine, the LTW expert who testified at the trial in the Adversary Proceeding, drove home the point that what made the LTWs a claim, and not an equity interest, was that it was intended to convey value (the Net Recovery) to the LTW Holders. This is the economic essence of the LTWs, this is their fundamental purpose, and this is what caused their appropriate accounting treatment to be a liability, and not an equity interest. Unlike equity warrants which deliver a fixed amount of shares with a variable value, LTWs deliver a variable

amount of shares for a fixed value (the Net Recovery). The LTW Agreement required WMI to give LTW Holders stock with a value equal to the Net Recovery. The Disclosure Statement at page 46 provides that the Common Equity Interests for common stockholders and LTW Holders will have an approximate value of $57 million. By definition, the Net Recovery will be far greater than the aggregate value of the Common Equity Interests. At a minimum, it is self- evident that there should be overwhelming dilution of the Common Equity Interests in favor of the LTW Holders.
14. The conversion formula in the LTW Agreement, which did not contemplate transferring less than full value of the Net Recovery to the LTW Holders, is a totally different formula than what is in the Plan. If the conversion formula in the LTW Agreement were followed, the following would result:
(a) Assuming (i) a Net Recovery of $337 million, (ii) common shares of 1.7 billion (Disclosure Statement, p. 82), and (iii) a common stock price of 7 cents (closing trading price on December 19, 2011 was .067), LTW Holders would receive approximately 74% of the Common Equity Interests. This is computed by first dividing $337 million by .07 (“LTW Share Amount”), and then computing a percentage where the numerator is the LTW Share Amount, and the denominator is the LTW Share Amount plus 1.7 billion.

(b) On the same assumptions but changing the common stock price to 3 cents, LTW Holders would receive approximately 87% of the Common Equity Interests, computed in the same manner as (a) above, subject to changing the share price variable. If there was proper disclosure made by the Debtors of the dilution, as well as the Reorganized Equity Value (see Section C hereof), the share price would be much less than 7 cents, and probably less than 3 cents.

15. Simply put, there is no basis for the sharing formula in the Plan, and the impact of the proper sharing formula and its resulting dilution on the Common Equity Interests must be properly disclosed. Moreover, the potential delay in making a distribution of the Common
Equity Interests because of the unresolved LTW issue must be properly disclosed. Without such material information, the Disclosure Statement is inadequate and cannot be approved.