Thoughts on Settlement and EC
22-Dec-09 09:08 am
I spent this weekend listening to the court hearings and looking at the court motions. Thinking about this case on my ride home from work yesterday, it all came to me. Here is my theory (In my humble opinion) which seems to make a lot of sense (I believe) and hopefully is correct.
1. Weil has negotiated a global settlement which DOES include a recovery for commons and the settlement is imminent. It will likely be a very good settlement for commons (High single digits) but not a great one (Double digits). It is a settlement which will make Weil look good and the Judge will be happy to approve.
2. The trustee is rushing with the EC not because the commons will otherwise be wiped out in a settlement but in order to CYA (Cover his ass). The Trustee has knowledge the settlement is coming and is worried that since it is not a great settlement, he may have legal exposure for not having created an equity committee prior to settlement and his office could be sued later for failure to perform his fiduciary duties as the argument will be the equity committee could have gotten more money in settlement.
3. The battle in court between the Trustee and Rosen could be over whether the EC is necessary in order to settle the case. Weil would be opposed to it since if a settlement is in place, an EC of the largest shareholders could easily screw it up. It is one thing for retail to fight settlement of an extra $1 or 2 but the biggest holders with millions of shares could really throw a wrench in any deal. Weil's position is at this moment we need billions to get to commons so no EC however if we settle and Judge approves as fair, we are done. I feel Rosen's statement in court was almost to convince the Trustee that there is 7 Billion until we reach equity so if we suddenly settle there is no liability on your part for not approving an EC, so don't bring it.
4. I also believe the above scenario on the EC is more realistic than the Trustee is rushing the EC to save the commons from being shutout of settlement. The case has come too far at this point for the Judge to approve anything that wipes out the commons. She has shown from this case and decisions on others we have seen to be very fair minded. After the allegations in the adversary complaints, the 2004 motion and the recently filed 3rd party 2004 motion, there is no way she will allow the commons to be wiped out unless she is satisfied there is no action against FDIC and JPM. Forgetting about the MOR and NOL for a minute, the allegation against FDIC and JPM could be worth billions. 1 week ago WMI filed the 3rd party 2004 request with numerous documents which support wrongdoing. The Judge would never accept a settlement without commons unless it was argued that debtors have no case against against FDIC and JPM and since they just filed the motion, Weil can't turn around and say our discovery showed no case and therefore we need to settle with just the money on hand. Won't happen.
Bottom line is I believe the EC is to protect the Trustee and not to save the commons from extinction. All IMHO
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