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Zitat Bopfan:
WamuChen's Deleted Post From Yesterday
I believe it was Chen who posted a very interesting analysis yesterday indicating that commons' reduction from 30% to 25% exactly corresponded to an increase in TPSC's portion (assuming it gets par) from $1.39B to $1.5B, all assuming the unrestricted NOLs are $15B and a 35% rate is applicable. If anyone saved it please re-post.
The TPSC owned $1.5B of the $4B in trust preferred securities, so it will measure the extent of its recovery by representing the amount as a percentage of $1.5B.
Former preferreds of all stripes had $7.5B in old face and hold 142.5MM (75%) of Newco. As TPSC held $1.5B or 20% of old face it gets 28.5MM shares of Newco. Each Newco share would have to be worth $52.63 for it to realize par on its old TPS securities.
It isn't likely that Newco can achieve this simply through savings on the NOLs, however such savings could get them (and retail) very close to 50% of par assuming $15B in unrestricted NOLs and a 35% rate, which would yield $5B in cash.
If the foregoing is correct, we infer old common has a new par of $2.5B through its 25% stake in Newco.
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Zitat ca9oo49:
This was WamuChen's post (hope he doesn't mind):
it's related.
Why TPS agreed with the Plan for an additional 5% stake out of from commons?
-the 1.5B TPS if eventually successfull could obtain 1.5B collaterals from its pursuit of the litigation against JPMC with no cerntainty.
-their original pie is at max. 4B.
-in newco, their pie could grow to more than 5B. [15B NOL x 35% = 5.25B tax savings]
-under 70/30 split of 95%, 1.5B TPS could gain
[(95% x 70% x 1.5) x 200M shares / 7.5] x 5.25B = 26.6%
26.6% x 5.25B = 1.3965B
-under 75/25 split of 95%, 1.5B TPS could gain
[(95% x 75% x 1.5) x 200M shares / 7.5] x 5.25B = 28.5%
28.5% x 5.25B = 1.49625B
For that 5% take, it pushes their recovery to 1.5B and gives them a "cerntainty". The left concern is how they can use the NOLs. From now on TPS and the hegies will dig thru their vault to find out ways to steal more from you. Watch.
There is no agreement on, to date, how much NOLs are available. >15B ? or >20B? Who knows?
And why TPS refused to cooperate at the earlier stage? The TPS group in the court can at max get their 1.5B back. Why 1.39B recovery from the use of NOLs was not attractive to them earlier? Huh? Remember, they bought cheap.
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Zitat Bopfan:
Thanks.
Everyone will see that if the NOLs are unrestricted and of these magnitudes we have the explanation of why the SNs didn't need old and cold last year.
If the NOLs are $15B, there's $5B in cash to be had, and if $20B, that will produce $7B. If they'd taken over the company last year from the H level, they'd have got all that for nothing, and would not have had to share it with the TPSC or retail. (Of course, they'd have lost their investment in their share of TPS face @ $2.5B, but that investment was pennies on the dollar.)
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Zitat juicyjuice1...:
The hedgies were allowed to keep over 3 billions in profit by trading against the retail and stay out of jail. The shareholders did not need 75 million dollars. We would have been happier to visit them in jail. Now there is suddenly a buyout strategy for less than 2 bilions. Why we can not ask 3 billions for 25% of the NEWCO and let the rascals go to h*ll and move on?
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Zitat distrojunky:
bop,
"If the foregoing is correct, we infer old common has a new par of $2.5B through its 25% stake in Newco."
For those of us with only Commons, that would mean 2.5/1.7 = $1.47 pps for WAMUQ?
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Zitat Bopfan:
That's the way I see it. That amount -- $1.50 or thereabouts -- would be the par.
However, given that Newco's cash value is worth at most $7B (assuming the NOLs are $20B and unrestricted), then $2.5B cannot flow to old common, who would own no more than 12.5% of Newco, and $2.5B is 35% of $7B. No more than $875MM would flow to old common, subject to the discounting I discuss below. In my view all of retail probably owns a maximum of 25% of Newco, which means 25% of the NOLs (again, the NOLs can't be 'cashed in', but retail can be bought out), so no more than $1.75B would be owing to the roughly 45MM shares of Newco held by retail. If you divide $1.75B/45MM, you get about $39 per share. If common get 1 Newco share for 33 common (I'm using the old 70/30 factor, not the 'new' 75/25 one), then common get at most around $1.17.
However, we have to remember that even if retail is bought out, retail won't get 25% of Newco because the money hasn't been earned yet. Whatever retail gets will be discounted for time, risk, etc. It could be substantially less than 25%.
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Zitat wamuchen:
"However, we have to remember that even if retail is bought out, retail won't get 25% of Newco because the money hasn't been earned yet. Whatever retail gets will be discounted for time, risk, etc. It could be substantially less than 25%."
That's where the pro. analysts set in and do the work. The buy-out offer, if any, would be less than what we talk about here. Whether they use other risks, the length of the monetization period, and capital dilution effect to minimize the amount they offer to us.
Before the 1st shareholder conference, the left EC elected guys should work out an agreement in principle to fix the buy-out range. If possible, retails, as suggested by Observer, should have hired valuation experts working on a contingency basis in order to assist the team to maximize the offer.
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Zitat Bopfan:
Another possibility is a buyout/merger with an existing business entity.
Such a business entity would certainly offer its stock in return for combining with Newco.
In this case, if the NOLs were valued at $20B they would have a cash worth of $7B. As you and I agree, Newco would not get anything like that; my guess is Newco would get stock valued between $3.5B and $4B. This would account for the acquirer's share of the benefit, risk, time value of money, etc.
As I said yesterday, since the total par of preferreds was $7.5B, and old WMI preferreds are getting 75% of the 95% of Newco, the old WMI commmon getting 25% of the 95% of Newco, then Newco has a par in excess of $10B (it must to account for the other 5% of Newco): about $10.53B or so (.95x/$10B=$10.526B). This means that the new par values are $526MM for the holders of the 5% of Newco, $7.5B for the former WMI preferreds, and $2.5B for the old WMI common.
If Newco were to receive $4B in stock, then each Newco share would receive 38% of par ($4B/$10.53B). Assuming the acquirer were prosperous and its stock enjoyed a healthy growth rate, that 38% of par could reach 100% in a few years, at nominal risk to former WMI interest holders.
In my opinion this is infinitely preferable to experimenting with the untested business model of a nascent enterprise, and for that reason (and others) I hope Newco is bought quickly or retail is bought out by the HFs (including TPSC).
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Zitatende
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