LTW Market Priced or BK Priced
This forum has some really good posts and information that allowed me to get up to speed really quick in November as a DIMEQ hedge against the WMI Ps. Thanks to all.
Currently, there some comments. IANAL, but have really followed this case closely.
First, there is question now if the LTW PPS has moved from where it was to where it is after the summary judgment was denied, and after the "reserve" was established, and the POR confirmation was denied is (1) because of the underlying value of the litigation award and the probability of success as debt, or (2) as a potential new fulcrum point in the waterfall that may get cash and or a piece of NEWCO.
Under (2), there is also a theory that it might be less than an honest investment; that the hedge funds would spend what is being spent to be able control the likely vote of the DIMEQ as part of Class 12 as they didn't get a chance to vote.
No one really knows other than the players.
Second, re: the US Court of Federal Claims, although it appears irrelevant, the ownership of the Anchor litigation may very well be the FDIC-R and the US DOJ motion precludes the FDIC-R from using it in the GSA to settle with anyone, including JPM. That will make JPM and FDIC-R not happy, and if the BK is not confirmed, it becomes a wild card.
Third, the $340M+ "reserve" is too attractive to the out of the money parties. For example, as the EC argued that the WAHU's were "equity not debt" and the Judge left that open, it would not be out of the range of likelihood that the EC would take a similar position with the DIME LTW. They would especially consider this if the debtor and DIME proposed a settlement.
I don't mean to throw a wet blanket, rather a wet face cloth.
This is a nasty bankruptcy and one has to risk assess as to if this will I make 2-1 for this risk and is it worth it considering the above comments. For those that hold a lot and for a long time, one might consider some profit-taking to cover the downside risk and not be so overweight. Also, although the reserve is almost $3/LTW or 3-1, one should also closely assess the risk of JMW issuing a split decision; debt but no pass through of the tax gross up; the original LTW is pretty clear on the tax application {regardless of actual rate} and 15% administrative and legal fees.
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