ec:
16. [...] With respect to the Reorganized Common Stock, the
Liquidating Trustee is given voting and consent rights. The Liquidating Trustee, Mr. Kosturos,
has throughout these cases directed the Debtors to argue that the NOLs, which will be held by
the Reorganized Debtor, have little, if any, value and even sought to have the Debtors emerge in
late December 2010 thereby abandoning significantly all of the potentially usable portion of the
NOLs. Mr. Kosturos’ demonstrated animosity toward maximizing the value of the NOLs
renders him unsuitable to exercise the rights attendant to the Reorganized Common Stock while
those assets are held in reserve. And aside from that clearly unacceptable mechanism, there is no
other means by which to preserve the value of the NOLs, which equity holders believe can be
exploited but that the creditors have insisted they will disregard.
18. [...] As discussed above, the
Liquidation Trust and Mr. Kosturos simply cannot have any prosecution or settlement control
with respect to the claims asserted by the Equity Committee against the Settlement Note Holders.
Similarly, Mr. Kosturos should not have any authority with respect to the estates’ potential
claims and causes of action against the Debtors’ former Officers and Directors – the same claims
that the Debtors have ignored for over two years and then attempted to sweep under the rug by
entering into tolling agreements in the middle of the July confirmation hearing. The Debtors
conduct to date amply demonstrates a willingness to sacrifice estate value to further the interests
of management and board members and thus the Debtors’ current representatives, including Mr.
Kosturos, cannot be relied upon to pursue these claims for the benefit of the Debtors creditors
and equity holders.
20. [...] Thus, the constituency most
motivated to maximize the value of those assets is not the creditors, the majority of whom stand
to be paid in full on or shortly following the Effective Date, but is the Debtors’ equity holders.
Accordingly, equity should choose a controlling majority the members of the Trust Advisory
Board, not the creditors, as the Plan currently provides. Furthermore, the Liquidating Trustee
should be chosen by the Trust Advisory Board, not by the Debtors’ management (Mr. Kosturos)
who, not surprisingly, has chosen himself.
tps:
9."The Debtors rely on an overstated burn rate to justify skipping mediation of
the entire plan. The $30 million per month figure cited by the Debtors is apparently derived
from the accrual of post-petition claims at the contract rate. At the federal judgment rate, the
interest accrued monthly is only approximately $11.4 million. Fees and expenses will be
incurred in some amount in addition to this, but those fees would undoubtedly be much greater if
teams of lawyers must gear-up for another contested confirmation hearing than they would for
mediation."
13. It is not clear under the plan where the claim would reside or who would
control the litigation. The Liquidating Trust to be established will hold claims of the estates not
otherwise released under the plan. There is no carve-out in this provision for the litigation
against the Settlement Note Holders. Read literally, this would seem to include the Equity
Committee’s claims against the Settlement Note Holders. The Debtors’ expect that Mr. Kosturos
will be the Liquidating Trustee of the Liquidating Trust (see Statement, Exhibit D at §§1.4, 6.1),
and Mr. Kosturos is the representative of the estates who opposed the Equity Committee’s motion
to obtain standing to pursue these claims and who personally participated in many of the
communications that gave rise to the claims. Mr. Kosturos would then be vested with the
authority to settle the very claims against the Settlement Note Holders these estates objected to
being brought in the first instance. As the Liquidating Trust Agreement is now drafted, he would
have authority to settle such claims without seeking this Court’s approval.
CONCLUSION
Wherefore, the TPS Consortium respectfully requests that the Court (i) direct the Debtors
to participate in good faith mediation with the TPS Consortium and other parties in interest
regarding issues to be delineated by the Court at the October 6, 2011 status conference; (ii)
decline to set a new confirmation hearing date until such mediation has been conducted; (iii)
reserve any ruling on the need for resolicitation until after the mediation and parties in interest
have had an adequate opportunity to respond; (iv) Order the Debtors to comply with the
solicitation procedures and release WMI securities being held in “voting” accounts; and (v) grant
any other relief that the Court deems just and proper.
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