Andyg59, we certainly appreciate your thoughts, expertise, and sharing your due diligence. You remind me exactly of a previous knowledgeable poster by the name of CBA09 who was a self-acknowledged Certified Bank Auditor who shared his first-hand subject matter experience. He seemed to have disappeared around late 2017 to the early year 2018.
Thank you Andy for some of your outstanding posts that I will repost so others can enjoy too.
The following posts are from IHUB Poster, Andyg59.
For WMIH to qualify for the NOL its capital structure has to be realigned at the consolidated level for which value has to flow to the escrow holders who signed timely releases. So next week should be interesting. _______________________________________
Yes dilution is inevitable in this scenario if the capital structure is to be realigned there by infusing value in favor of escrow shareholders. _______________________________________
The utilization of the NOL is subjected to maintaing intact the pre bankcruptcy capital ratio in which the escrow shareholders are the majority.
Under the relevant IRS tax provisions the NOL can be used as a tax shield to offset any net profits derived from rolling up the subsidiaries (100% owned) into the consolidated financial statements.
So all you need to ask your self is whether or not the reporting subsidiaries in this fiscal year has been reporting quarterly net profits cumulating in an overall net profit at year end. Then if the answer is yes then it would be unwise not to tap into the NOL at a consolidated level assuming the old capital ratio remains intact. ________________________________________
Mr Cooper is a 100% subsidiary of WMIH which is the holding company. Its not Mr Cooper NOL it is WMIH NOL contingent that the existing capital ratio remain intact. The results of the subsidiaries are rolled up into the consolidated statement provided by the holding company. ________________________________________
I am a Financial Professional with many years working in Offshore Tax Jurisdictions. ________________________________________
I am only interested in seeing how they will utilize the NOL at a consolidated level contingent on maintaining the capital ratio to reflect escrow holders who have to be made good. _________________________________________
Noted. If WMIH =MR COOP= PARENT through a name change then a component of the capital structure common shares = escrow shareholders = 0 in the Balance Sheet. How can the NOL be utilized if that is the case on consolidation of the numbers subject to the IRS provisions? _________________________________________
Yes the old capital structure has to maintained and be in compliance with the IRS Provisions for the NOL in order to file a claim to use it on consolidation. The old structure does not equates to the new structure as a result of the merger activity including the change in ownership due to those shareholders who did not sign timely releases as you pointed out.
An allocation of old shares to those shareholders who signed timely releases would make sense. To restore the old capital structure with an infusion of value to existing escrow holders will require a significant dilution to take place if they are to comply with the IRS NOL Provisions. Since the merger activities are proving to be profitable this is a trigger for addressing the NOL issue. _________________________________________
Thanks for the link. With respect to the quote "we concluded that the market is too conservative about the rate at which we'll utilize the DTA, or it's not assigning enough value to zone"
Its my understanding that until there is an infusion of value to the escrow holders to restore the old capital ratio the market will not be able to assign enough value as stated in the above quote.
This will be the trigger to imply that they are now utilizing the NOL for tax purposes in compliance with the IRS NOL Provisions. Until this happens the tax shield effective rate cannot be determined for valuation purposes. _______________________________________
Yes it will excite the market but it will also depend on a number of other variables which will need to be taking into consideration like dilution, off balance sheet assets via SPV's for which escrow shareholders are the beneficiaries. ______________________________________
The current value is not being reflected through the consolidated statements which has to be addressed in subsequent reporting. Thats is what has to be addressed if they are going to utilize the NOL through the the infusion of value to the escrow shares to be compliance with IRS NOL Provisions in order to offset the net profit of the merger activities. _______________________________________
To add further to my response earlier proper accounting of the escrow shares in the consolidated balance sheet is incomplete. The focus of attention should be on the Capital side of the consolidated Balance Sheet and Disclosure. ______________________________________
Yes I dont often post on boards and especially as frequent as now. However, in response to your question it will depends on two main contributing factors how they are liasing with the IRS with respect to time sensitive issues pertaining to claiming the NOL as well as the urgency of utilizing the NOL through the consolidated numbers so as to mitigate their exposure to a tax liability. Since no one wants to pay taxes.
They will need to account for the escrow shares in the consolidated numbers through the infusion of value first. There has to be a proper reconcilation between the consolidated financial statement to the IRS statement if they are going to utilize the NOL. So subsequent reporting is crucial and desire to mitigate there tax liability in the fiscal year _____________________________________
So the urgency will be how profitable the subsidiaries is through consolidation in a given fiscal year will give you an indication as to the urgency of this matter. So watch the numbers and focus on the capital side of the consolidated balance sheet and disclosures since its incomplete. _____________________________________
This is correct an analysis of the audited consolidated financial statements going forward has to show proper account for the escrow shares with an infusion of value to restore the old capital structure. Only thèn can you utilize the IRS NOL to offset consolidated net profits if they going to mitigate their tax exposure. Who wants to pay taxes anyway. _____________________________________
The more profitable the merger becomes the greater will be the pressure to restore value to the escrow shares if they going to mitigate their tax liability. _____________________________________
Yes its the crucial cut off point to show the original capital structure has remained intact. From an accounting perspective a reconciliation has to be done relating to the given fiscal year to show in fact this is the case with any adjustments like those who did not sign timely releases which will need to be reallocated to thise who did flowing through their consolidated numbers if they going file and tap into the IRS NOL. If they dont the claim will be rejected by the IRS due to non compliance with the NOL provisions and they will be exposed to a tax liability and possible penalties as well. Its would be interesting to see how they have filed there previous corporate tax returns although they can always file for amendments. ______________________________________
Yes that is the likely behavior of the market price of the securities. But from the accounting perspective the restructure would be restored to the original point and shares issued to escrow holders. The market will then be able to begin monetarizing the NOL going forward through the infusion of value to the escrow shares with a conversion into commons with a dilutive effect. The IRS NOL will be utilized to mitigate their tax exposure as a result of current and future merger/takeov er activities. Again who wants to pay taxes any ways. ________________________________________
Any cash returns to Escrow Markers will be done through the Off Balance Sheet Assets Mechanism via Delaware which were never brought into the bankruptcy court jurisdiction and are the beneficiaries of Escrow Shareholders. These other assets like SPV's matured or liquidated will flow directly to the escrow markers for many years to come. They will have no bearing on the consolidated numbers churned out by Mr. Cooper now or in the future. But the cash returns received by the Escrow markers could be invested and influence the market price of the common shares to new highs. _______________________________________
I am not clear when you said some of Coop shares were used to purchase Nationstar. Remember when they came out of bankcruptcy they had limited resources to make such a big move. The Sources and Uses of Funds Statement For that period could give you a better insight as to how the merger was funded resulting in a subsequent reverse split. Also take a look at this article which will give you an idea how limited the resources were at that time.
Also the infusion you make reference to enhance value will only be to the benefit of the escrow shareholders through conversion at the detriment of non escrow shareholders resulting in dilution. ________________________________________
This is a major accounting problem since the purchase agreement between FDIC and JPM was so vague and of a fraudulent nature. There has been gross negligence on the part of FDIC. Although the attempts to return some of the assets by JPM I believe there could even be more littigation to come before this is brought to a satisfactory closure.
But to answer your question the only audited financial statement that you could obtain and place reliance on before the event took place. It should be available on SEC site. Then if there were any further audited filings after this event took place then you can do a direct comparision as to what was specific Stolen or what FDIC stated it transferred over to JPM. Again any assets returned by JPM are for the beneficiaries of the escrow markers.
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