Replies to post #239 on TMST, Inc., 8% Senior Notes (TMA.GB)

[Enterprising Investor]

Judge orders RBC to pay $45 million in housing crash suit (8/28/15)

A federal bankruptcy judge ordered a division of the Royal Bank of Canada this week to pay about $45 million in damages for undervaluing assets it seized from a now-defunct real estate firm in the 2007 housing collapse that fueled the recession..

Judge George L. Russell found that RBC Capital Markets LLC extended credit to Thornburg Mortgage Inc. in 2007 based on a bid for the company's mortgage-backed securities that was lower than RBC's internal valuation when it had declared Thornburg in default several days earlier.Russell held RBC liable for $26.26 million — the difference between the two values — plus interest.

RBC declined to comment. The money will be distributed to creditors of Thornburg, which is now known as TMST Inc.

Thornburg, a large real estate investment trust based in New Mexico and registered in Maryland, filed for bankruptcy protection in Maryland in 2009, disclosing $24.7 billion in debts arising from its dealings in bonds backed by pools of residential mortgages.

Baltimore attorney Joel Sher of Shapiro, Sher, Guinot & Sandler was appointed trustee after the Department of Justice said former Thornburg executives continued to collect salaries from Thornburg after the bankruptcy filing — and after they started a new, similar firm.

As trustee, Sher filed suits against multiple companies, alleging that their actions had helped drive Thornburg into bankruptcy. A suit against five of Wall Street's biggest players is still pending.

Barclays Capital Inc. settled claims similar to those brought in the RBC suit for $23 million last year. A suit against Goldman Sachs moved to arbitration and was dismissed.

http://www.baltimoresun.com/business/bs-bz-rbc-settlement-20150828-story.html

[Enterprising Investor]

Judge Rules for Thornburg Mortgage in Suit Against RBC (8/28/15)

Failed mortgage lender entitled to $45 million after ruling that RBC undervalued seized assets

A federal judge has awarded the court-appointed trustee overseeing the liquidation of Thornburg Mortgage Inc. $45 million in his crisis-era lawsuit against Royal Bank of Canada, finding the bank shortchanged the mortgage lender when it seized and subsequently sold some of its assets.

U.S. District Judge George L. Russell III ruled Wednesday in Baltimore that RBC Capital, the lender’s investment-banking arm, improperly sold the assets backing repurchase agreements the mortgage lender had used to fund its business. RBC seized the mortgage securities after Thornburg defaulted during the turmoil in the mortgage market in August 2007.

In granting the Thornburg trustee’s motion for summary judgment, the judge said RBC undervalued the seized mortgage-backed securities at issue by $26.3 million. With interest, Thornburg is owed $45 million in damages.

A spokeswoman for RBC didn’t respond to requests for comment.

Joel I. Sher, the bankruptcy trustee overseeing Thornburg’s liquidation, sued RBC Capital Markets in a breach-of-contract lawsuit over what he said were improper margin calls and the subsequent seizure and sale of $573 million in mortgage-backed securities Thornburg financed through RBC.

Before its collapse, Thornburg was a publicly traded real-estate investment trust that invested in residential mortgages and mortgage-backed securities.

The company financed its business, including its purchase of mortgage-backed securities, through a series of repurchase, or repo, agreements and swaps deals with banks and securities firms like RBC. Those mortgage-backed securities were typically then pledged as collateral in the deals.

Mr. Sher claimed RBC breached the provisions of the repo deal by improperly valuing Thornburg’s collateral to create deficits that justified its inflated margin calls.

The trustee filed similar lawsuits against other banks, including Barclays PLC and Goldman Sachs Group Inc., alleging they made improper margin calls that helped drive the mortgage lender into bankruptcy. Barclays settled last year for $23 million. The Goldman suit was settled last year for an undisclosed amount.

Mr. Sher also sued some of the biggest players in Wall Street’s mortgage-finance business for nearly $2 billion, claiming a number of banks—including J.P. Morgan Chase Co. , Citigroup Inc. and Credit Suisse Group AG —engaged in series of “collusive” and “predatory” schemes that resulted in Thornburg’s demise. The banks, in court papers, have denied wrongdoing.

A judge last year dismissed the bulk of that lawsuit but said Thornburg could still go after the banks for breach of contract and other claims totaling about $1 billion. The suit is pending.

Thornburg, based in Santa Fe, N.M., filed for chapter 11 bankruptcy-court protection in May 2009. Mr. Sher was named the trustee of Thornburg, now named TMST Inc., in 2009 after it was discovered the company’s former managers had used the lender’s employees and assets to launch a new company.

http://www.wsj.com/articles/judge-rules-for-thornburg-mortgage-in-rbc-capital-suit-1440769477

[Enterprising Investor]

Joel I. Sher, Chapter 11 Trustee for TMST, Inc. v. RBC Capital Markets Inc., United States District Court for the District of Maryland, Case No. 11-01998 (11/16/16)

Order granting Motion to Stay Enforcement of a Judgment or, in the Alternative, Motion to Approve a Supersedeas Bond; staying this Court's 08/26/15 judgment pending the disposition of RBD Capital Markets, LLC's appeal; approving the supersedeas bond.

Signed by Judge George Levi Russell, III on 11/16/2016.

Source: PACER {Docket 180]

Supersedeas bond is in the amount of $54,308,097.04 was approved.

[Enterprising Investor]

Motion to Approve Stipulation/Settlement and Compromise of Controversy Between the Trustee and RBC Capital Markets, LLC. Notice Served on 1/10/2017, Filed by Joel I. Sher. Responses due by 1/31/2017 (1/10/17)

RBC has agreed to pay the Trustee $30,125,000.00 in full and final satisfaction of any and all claims, demands, obligations, liabilities, and causes of action of whatsoever kind and nature asserted in, which could have been asserted in, arising out of or related to the allegations set forth in the Complaint and/or the District Court Action, including, but not limited to, claims arising out of or related to any repo transactions entered into between RBC or any of its affiliates and any of the Debtor releasing Parties, margin calls in respect of such transactions, and the liquidation of collateral posted by the Debtor Releasing Parties in respect of such transactions.

Payment will be made within 10 business days of entry of an order granting this Motion approving the Settlement Agreement in its entirety.

Each Party shall bear its own legal fees, costs, and expenses.

Within three business days after receipt of the Payment by the Trustee, (i) the Parties shall file with the Circuit Court a stipulation of dismissal of the Consolidated Appeal with prejudice, and (ii) the Trustee shall file a line with the District Court marking the Judgment as settled and satisfied.

On the 8/26/15, the District Court (Judge George L. Russell, III) issued a Memorandum Opinion and Order [Dkt. Nos. 152 and 153 in District Court Action, respectively] denying RBC’s Motion for Summary Judgment, granting the Trustee’s Cross Motion for Summary Judgment, and entering judgment in the amount of $26,259,118 plus prejudgment interest at the rate of nine (9) percent from August 14, 2007 through the date of judgment.

In the Memorandum Opinion, the Court ruled, inter alia, that RBC breached the MRA by failing to provide credit to TMST for the liquidated MBS in the amount of the price for the MBS from a generally recognized source determined as of the default date and that certain take down prices assigned by RBC to the MBS on the default date were the relevant and appropriate measure of damages as compared to the amount actually credited by RBC.

1 The amount of the Judgment with pre-judgment interest totals $45,256,330.87 (inclusive of $18,997,212.87 of pre-judgment at the rate of nine (9) percent from August 14, 2007 through the date of judgment.

Source: PACER [Docket 2472]