Chemtura & WMI: a tale of two equity committee requests
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In both the Chemtura and WMI backruptcy cases, Akin Gump is a counsel to the Official Committee of Unsecured Creditors.
In both the Chemtura and WMI backruptcy cases, counsel to an ad hoc committee of independent non-insider shareholders has recently requested that the U.S. Trustee appoint an official equity committee.
In both the Chemtura and WMI backruptcy cases, the U.S. Trustee has requested that interested, official, parties to the bankruptcy proceedings provide their views on the request for the appointment of an official equity committee.
In the Chemtura case, the bar date for filing proofs of claim against the Debtors' estate was October 30, 2009, which is one month ago. There were more than 14,000 claims filed.
In the WMI case, the bar date for filing proofs of claim against the Debtors' estate was March 30, 2009, which is seven months ago. There were 3,800 claims filed. There are many claims which were "unsupported", "late filed", or "duplicative"and have been "expunged". Many more of these claims have been or will soon be "expunged" because they are claims against WMB, not WMI. The Debtors have already filed 16 Omnibus Objections to Claims, and many of these have been largely worked through.
"The threshold issue in determining whether to appoint an official equity committee is whether there a substantial likelihood that shareholders will receive a meaningful distribution."
Is Chemtura "hopelessly insolvent", such that it is unlikely that "shareholders will receive a meaningful distribution"? I have no idea because I haven't looked into the financial details of that case.
Is WMI "hopelessly insolvent", such that it is unlikely that "shareholders will receive a meaningful distribution"? Assets are currently $1.3 billion less than liabilities; projected federal tax refunds are $2.6 to $3.0 billion (before the new NOL carryback changes); a lawsuit against FDIC is for $14 billion + unliquidated; lawsuits against JPM are for $20 billion + unliquidated. There are additional recoveries possible as discussed previously.
Akin Gump letter to the U.S. Trustee in Chemtura case, in which Akin Gump opposes the formation of an equity committee:
http://kieljamespatrick.com/ChemturaNov25LettertoUSTreEquityCommittee.pdf
Akin Gump letter to the U.S. Trustee in WMI case:
(Not yet available; probably opposed?)
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As an interesting side note, the Akin Gump letter in the Chemtura case states:
"In addition, the trading price of the Debtors’ common stock has fluctuated over the course of these chapter 11 cases and is not an accurate or reliable indicator of the value of the Debtors’ estates."
And another interesting side note from that letter:
"...the interests of the Debtors’ shareholders are represented by the Debtors. The Debtors have a fiduciary duty to maximize the value of their estates for all stakeholders, including shareholders... [case] (noting that once a company becomes insolvent, the directors still owe a fiduciary duty to the shareholders and that the officers of a debtor in possession are expected to fulfill the fiduciary duties of a trustee)."
