A 'meow' of sorts.. nothing surprising, or should be.
I wish I had some cohesive or at least solid and congealed thoughts to share, but honestly I don't. I had hoped that the EC’s “letter” to shareholders would have hit by now, but the latest information I/we have is that it may be Monday. But honestly, I don’t expect that “letter” to clear up things complete.
In fact, I expect it to add to the questions – answer some, bring up new ones.
There are still wheels-in-motion here. While certain things with PORv7 seem “known”, there are significant unknowns that affect anybody’s investments, including mine, and guesses are the only thing to go on. I can argue both sides of various equations and assumptions.
If you’re expecting me to project WMMRC/NewCo value, PPS prices, or otherwise – then (a) you don’t know me and my postings very well, and (b) you aren’t realizing that this situation has way too many moving parts to give anything like that.
1) Provide a conversion ratio for Preferreds and Commons into NewCo equity. Right off the top may be 5% of NewCo going to SNHs who decide to take common stock instead of being cashed out – I am assuming, that since the SNHs wanted NewCo in the past, wholly to themselves, that they still want whatever piece they can get – so I’m assuming that 5% will go to SNHs.
2) The remainder of NewCo – 95% -- goes first – 70% of that, to Preferreds. TPS, Ps and Ks are the preferreds - pari-passu. In the exiting of Bankruptcy, the concept of “preferreds” is gone. Everybody becomes simple NewCo common equity. But 70% of that 95% will go to the current preferreds. This is how they are ‘approximating’ the priority required by law, and required to meet the “best interests of creditors test”. (For the last time, APR is a strictly applied waterfall issue if there is no settlement. In a settlement, priority still must be maintained, but it is ‘negotiable’ – does not violate APR as a negotiated item. But that negotiation MUST retain priority}
3) I expect TPS to raise cain about
#2 - they were excluded, largely, from mediation and I feel will fight tooth-and-nail against this.
4) The remaining 30% of the 95% goes to existing commons.
5) DimeQ is a huge wildcard. IGNORE THIS FACT AT YOUR OWN INVESTMENT PERIL. Depending on how it is placed (as debt, or as equity) means either reducing the value of everybody, or just NewCo commons. This is HUGE. I can’t speculate further on what the court will do, or what the new mediation including DimeQ will do to this. But this ought to be on anybody’s radar as a huge unknown.
6) There are three values to NewCo. One is the value of WMMRC is “run-off” mode. The other is the value of non-debtor subs. And the third is the ‘unknown’ future value of the Litigation Trust. {A forth value, a negative one on the balance sheets, is the loans from the SNHs to litigate and/or merge -- that is a negative value as draws against those loans occur - and a liability that is of a big concern to me, and to others I've spoken with. Do not underestimate this issue.}
7) The Litigation Trust’s proceeds will first go to the H’s. (And up-streamed to SNHs up to a certain point to make up the difference between contract rate and FJR). After H’s are made logistically full (not to $34 a share, and not a re-re-fullness – they are paid once and only once by the estate) – then the excess gets put into the NewCo – and preferreds and commons will share alike in that. No cash, just the added value of NewCo. Targets of litigation, IMHO, are things like Goldman Sachs, Ratings Agencies, D&O insurances, etc -- JPM and FDIC are off-limits per the GSA. And such litigation, with perhaps the exception of D&O policies, will take some time. Perhaps signficant time. Period.
8 ) NewCo will HAVE to merge and merge again, etc to take advantage of the NOLs. You can't "write a check" on a NOL. I have seen and discussed estimates that this may take up to a year for the first merger to be completed and fully consummated. It’s much more than a trivial exercise. The market will take time to value the first "MergeCo" and the subsequent P/E of "MergeCo" and the next "SecondMergeCo", etc, etc. But after the first "merger", is successful -- then things get much smoother... IMHO.
9) However, we already know that the SNHs had planned for a merger (this was disclosed in the early, failed, PORs - however the mechanics and the target were undisclosed) and we also know from billings and from in-court testimony that offers had been made - similarly, the targets and mechanics were undisclosed. It’s going to be up to the “NewCo” BOD to evaluate merger potentials, and not rush into things. There are very specific IRS limitations – one of the biggest ones is that you can’t just merge with, say, a giant General Electric or Exxon and eat up all the NOLs at once. It’s gotta be a similar business, of similar size, of equals. Games of “subsidiaries” of big companies don’t fly either. In short, you can’t just “shop around” your NOLs.
10) The issue posted earlier yesterday about the ‘immediate’ tradability of NewCo stock, I believe to be a real issue. Now in practicality, it may not be a real issue. But for those who may have converted IRAs into ROTHs, you need to consider how such a ‘dark’ company stock may affect your ability to re-characterize, if you wanted to prior to your tax deadline (April 15th, or extensions to Oct) -- or the fact it may force you to pay the taxes on that conversion through separate funds. ASK YOUR TAX ADVISOR, not me.
Things I think are OVERBLOWN or not of significant magnitude.
1) NSS and some “mother of all short squeezes”. No. I think you have your evidence – the PORv7 didn’t produce one. There has been plenty of opportunity for any NSS of any magnitude to cover over 3 years. And the whole “you don’t pay taxes” thing has been totally debunked. I won’t argue this further. Why would any remaining, significant, NSS not close out at $.07 a share? That trivial remaining profit makes no logical sense. The only viable answer is the debunked “taxes” thing. That kite no longer flies. However, if you continue to hold that string -- good for you. I won't bother blowing for your kite to fly.
2) There are huge hidden assets. No. The non-debtor subs have been valuated. It’s in the DS. The other assets are in the GSA, unvalued in mass, but are scheduled to be ‘sold’ under the GSA for a pittance to JPM to cause them to be no longer a disputed asset. There will not, IMHO, be any new substantial ‘hidden’ assets showing up. This is a matter to grow-up about and accept, and not create fantasies about. If you continue to believe this, or proffer this -- then you're not reading anything in the GSA, or are misguided. IMHO.
3) JPM and/or the FDIC are going to swoop in at the last minute and sweeten the deal. No. Not in my mind, or not in any significant magnitude. There may be some adjustments, like in VISA Class-B share pricing, etc – but nothing of significant magnitude. If you have something factual to add here, then do so. But otherwise, you're wishing and hyping.
4) Stern saves us. No. This court has ruled that a “settlement” is not an “adjudication” for a non-core issue. Those items in the GSA are a “settlement” and have been ruled, by this court, not applicable to the “limited interpretation” of Stern. She may very well be wrong here. But it won’t help us. This Stern issue will be resolved well after we’ve exited bankruptcy, shares converted, monies disbursed, and it will be only a footnote after-the-fact on whether this court was ultimately right or wrong in her decision about Stern and “settlements”. If you have a factual case where a 'settlement' was delayed by Stern, then show it.
5) Applying "penny stock" mentalities to "reverse splits", etc -- this isn't such a thing - or the comparison is incorrect/bogus. That said, I'm not debating that in "penny land" that a RS is an issue. This IS NOT the same thing here, as exiting a bankruptcy. Apples/oranges. PERIOD. The changing of billions of shares between OldCo preferreds and commons (at the ratios mentioned above) into something managable in the number of shares outstanding is JUST a conversion -- not your "typical" issue of penny-stock "reverse splits". IMHO, get over it. Whether it's $1000 as 1000 shares at $1 each, or whether it's $1000 at 250 shares $4 each or whatever -- it's the exact same total value. Period. I trust the semi-average investor can do the various forms of math to determine the "NewCo" vs. "OldCo" shares they hold and the conversions -- and the OVERALL value. And if you can't, IMHO... You need to select a mutual fund to invest in.
Lastly, I really do think that we are in the end of this ‘game’. For better or for worse, this court IS going to approve a POR, of some form, in the very near future. The bankruptcy courts are set up to resolve bankruptcies. There will be, and the courts acknowledge this, never a ‘perfect’ or even ‘fair’ resolution to a bankruptcy – that is ‘fair’ to all parties. There is a process of imperfect application of law and settlements.
The court is NOT going to allow the Equity Committee to go on a search-and-destroy fishing expedition at this time, all the while draining the estates assets and monies further, to the hurt of creditors. It's not going to happen.
To that end, if the Equity Committee and the other major parties are “behind” a POR – barring an earth shattering asteroid-sized event or new fact, the situation is-what-it-is. And the court is going to approve, in substance, the proposed – and ‘mediated’, POR.
Wishful fantasies, not withstanding, are just that.
And if you don’t understand anything else – understand this: Everything “wrong” that was done to Washington Mutual - PRE BANKRUPTCY – that are “district court” – tort, etc issues, are settled away in the GSA. This bankruptcy court is so the issues are the remainders of the estate. Period. If you hold any "pre-bankruptcy" contempt, realize that your contempt will not help us here. That's fact. And that stinks. But that's fact to your and MY investment.
In closing:
I HATE what has been done here. I am a pre-seizure holder who has averaged down. I am dismayed by the whole process here. And that little light I held for justice and the ‘American way’ has been tarnished. I have learned way more than I ever wanted to about how ‘big money’ and Wall Street really works.
I am not satisfied – in the least – by what has happened here. But that doesn’t stop me from understanding it, to the best of my abilities, as being WRONG, so very wrong.
Yet, I can’t write a check on that, or buy or sell 'that' stock of contempt.
I can only buy or sell the stock I do have, which is rooted in the realities of the situation here.
GLTA. GLTY. And may we see a light at the end of this tunnel that is not an oncoming train. :)
Lastly, do not trust the SNHs or any of the "big boys" in this game. They are not out to help us. Be wary, and be concerned. I don't trust them one bit.
…Catz
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