Mr Cooper Group Inc (COOP)

[marayatano]

Originally hedge funds did not need equity to retain NOLs, however, that is the past.

Today, they cannot outright buy the entire WMI2 because they are a more than 5% owner and that would be a constitute a change in ownership if they attempt to purchase more or all of WMI2 effectively reducing WMI2's NOLs to ZERO.

The only way the hedge funds can purchase more or all of WMI2 is two ways:

1. Between the effective date of the POR, and within approx. 10 days with a tender offer, before the new WMI2 shares hit your account. (Possible, but can they or will they attempt it to take advantage of the first change in ownership since the first change in ownership is considered a "freebee" or exception to the rule and still retain NOLs)

2. After two years of the first change of ownership (emergence from BK) per IRC Section 382(l)(5)(D).

(D) Section 382 limitation zero if another change within 2 years
If, during the 2-year period immediately following an ownership change to which this paragraph applies, an ownership change of the new loss corporation occurs, this paragraph shall not apply and the section 382 limitation with respect to the 2nd ownership change for any post-change year ending after the change date of the 2nd ownership change shall be zero.

http://www.law.cornell.edu/uscode/text/26/382

The first change of ownership upon emergence of BK, even though there was a change of ownership, NOLs still remain in tact, IRC Section 382(l)(5).

a very favorable exception is available to bankrupt corporations under section 382(l)(5), which allows the bankrupt corporation to emerge with no limitation on its NOLs despite the fact that an ownership change has occurred.

http://mcgladrey.com/Business-Tax-Compliance-and-Consulting/Service-Rules-Against-Taxpayer-in-HighlyStructured-Bankruptcy-Workout?itemid=796&mid=796

Short Answer: No, no one can buy out WMI for at least two years after the first change in ownership/effective date of POR (except that 10 day window before WMI2 shares hit your account).

Thanks Claw for the second link.

imo