Washington Mutual demanda a la FDIC por 17 billones US$ + daños

1.700.000 titulos negociados a esta hora, ha habido intercambios de 500.000 y 250.000.
¿quien coño esta saliendo y quien entrando? ???????????????

Jul 20 Viernes - 528.000
Aug 6 Lunes - 1.800.000
Sep 7 Viernes - 1.700.000
Oct 22 Lunes - 1.700.000
Nov 16 Viernes - 1.700.000

Our discussions recently on finding the plausibility of NOL exploitation and related assessment of ownership change and section 382 limitation left us a little disheartened for either a steady or quick resolution of value potential of WMIH. We all knew that it was a difficult task but were hopeful that professional involved and HFs collectively owning a large number of shares would be conducive to finding a way to enhance company’s value.

Even in absence of concrete information, we were positive that contrarian indicator of HFs involvement was pointing to a brighter future. However, as we sharpened our research on ownership restriction and its impact on NOL, many of us started to feel that path to relative success was long and arduous and full of uncertainty. After all, both recapitalization and acquiring others or being acquired seemed to be an almost impossible task if seen in the context of written regulatory/tax rules. Investorwad logical thread recently expressed that possibility.

In my posts regarding NOL recently, I acknowledged that the sword of section 382 limitation would hang over WMIH regardless of whether the subsequent ownership takes place in two years or three or after. However, I was encouraged somewhat about the tax free reorganization/merger if WMIH could do so by avoiding ownership change. Same is true for internal growth by acquisition.

Basically, the work of Art by the team of practitioner has two important parameters. Take the best course of action after assessing opportunities in a manner that do not let the following happen

a) 5% or more of shareholders do not increase their positions by 50% and any new shareholders as part of merger does not have a more than 5% ownership.

b)Total equity shift is less than 50% ,for example, after the merger new shareholders do not own more than 50% of the acquiring company as acquiring company’s shares are given to the shareholders of the acquired company in a tax free reorganization.

For the management of ownership restriction, the equity shift and 5% owners are the two major considerations simply speaking.

After doing secondary research to the point possible, I had resigned myself to the expectation that my research did indicate in a tentative way some exceptions affording flexibility and the scope that the professionals would find a way. I think even a non-practioner PhD in taxation would not be able to handle the operational/soft skill side of the equation .

I do not know if it is Thanksgiving festivity that made me research a bit further happily or synchronicity of this special day (a good omen if you believe) that I at least have a concrete example that operational side (of this work of ART project) is manageable.

Leucadia has recently acquired Jeffries (investment bank) in a tax free merger/reorganization. The main relevant theme for us is that Jeffries would gain balance sheet strength in uncertain times and Leucadia would be able to off-set its large NOL against Jeffries income. Both company’s shareholders would be happier financially.

“A key part of the deal is the assumption that the ongoing profitability of Jefferies will create the earnings to utilize a large net operating loss held on Leucadia's balance sheet, converting it into capital that could bolster future trading and banking business.”

http://www.thestreet.com/story/11763723/1/leucadia-to-the-rescue-after-jefferies-rescued-knight.html

Leucadia has not been in bankruptcy but has a large pool of NOLs and in general a good example of successful NOL exploitation. In fact, a few years ago they bought a company that had huge NOLs (how did they do it?) and did not update their balance sheet for tax assets citing uncertainty if they could generate enough income to offset these NOLS (just like WMIH). Later, they resold that company yet were able to retain the NOL (how did they do it?). If I remember correctly, Observer and Gibson used to illustrate ,at the Yahoo message board, Leucedia’s earlier acquisition as a model for WMI when I was a mere reader and not a contributor to that board.

Apart from business continuity baggage from 382 (l) (6) for two years, WMIH is similar to Leucadia in the context of NOL management. WMIH has to avoid the ownership change in whatever transaction it pursues.
Let us look at the merger document of Leucadia and Jeffries. It is a two-step merger involving first Jefferies merging into a newly created merger corporation then converting into LLC and incorporating in Delaware (all complex merger stuff if you want to avoid). Then this new entity is merged with Leucadia.

“(f) Section 382 Limitation.
(i) If, as a result of the conversion of New Jefferies Common Shares into the right to receive Leucadia Common Stock pursuant to the Second Merger, any Person who was not previously a “5-percent shareholder” would (x) become a “5-percent shareholder” in respect of Leucadia or (y) be treated as owning 5% or more of the outstanding shares of Leucadia Common Stock after the Second Merger, in each case, as determined by the Leucadia Board of Directors in accordance with Treasury Regulation Section 1.382-2T(g)–(k), Leucadia shall cause the Exchange Agent to sell the minimum number of shares of Leucadia Common Stock necessary that are otherwise deliverable pursuant to this Agreement so that such Person would not be treated as (A) a “5-percent shareholder” in respect of Leucadia or (B) owning 5% or more of the outstanding shares of Leucadia Common Stock after the Second Merger (“Excess Leucadia Common Stock”).

(ii) Leucadia shall cause the Exchange Agent to execute the sale of any Excess Leucadia Common Stock on the New York Stock Exchange in round lots to the extent practicable. Leucadia shall cause the Exchange Agent to use all reasonable efforts to complete the sale of the Excess Leucadia Common Stock as promptly following the Second Effective Time as, in the Exchange Agent’s reasonable judgment, is practicable consistent with obtaining the best execution of such sales in light of prevailing market conditions. Leucadia shall cause the Exchange Agent to apply any proceeds of a sale by it of Excess Leucadia Common Stock, and any amounts received from a Purported Holder (as defined below) pursuant to Section 2.2(f)(iii), as follows: (A) first, an amount up to the fair market value of the Excess Leucadia Common Stock, calculated on the basis of the closing market price for Leucadia Common Stock on the day before the Closing Date, shall be paid to the holder of New Jefferies Common Shares that would otherwise be entitled to receive such Excess Leucadia Common Stock (the “Purported Holder”) and (B) second, any remaining amounts shall be paid to the Leucadia Foundation or any one or more organizations qualifying under Section 501(c)(3) of the Code (and any comparable successor provision) selected by the Leucadia Board of Directors.

(iii) Any delivery of Excess Leucadia Common Stock to a Purported Holder shall be prohibited and treated as void ab initio. No employee or agent of Leucadia shall record the issuance of any Excess Leucadia Common Stock to a Purported Holder, and the Purported Holder shall not be recognized as a shareholder of Leucadia for any purpose whatsoever in respect of the Excess Leucadia Common Stock. The Purported Holder shall not be entitled with respect to such Excess Leucadia Common Stock to any rights of shareholders of Leucadia, including without limitation, the right to vote such Excess Leucadia Common Stock or to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any. Upon discovery by Leucadia that, notwithstanding the above, a Purported Holder has received any Excess Leucadia Common Stock, then, upon written demand by Leucadia, the Purported Holder shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Leucadia Common Stock within the Purported Holder’s possession or control, together with any dividends or other distributions that were received by the Purported Holder from Leucadia with respect to the Excess Leucadia Common Stock (“Prohibited Distributions”), to the Exchange Agent (or any other agent appointed by Leucadia), and Leucadia shall cause the Exchange Agent (or such other agent) to sell such Excess Leucadia Common Stock in accordance with Section 2.2(f)(ii). If the Purported Holder has sold the Excess Leucadia Common Stock before receiving Leucadia’s demand to surrender the Excess Leucadia Common Stock, the Purported Holder shall be deemed to have sold the Excess Leucadia Common Stock on behalf of the Exchange Agent (or such other agent), and shall be required to transfer to the Exchange Agent (or such other agent) any Prohibited Distributions and the proceeds of such sale, except to the extent that the Exchange Agent (or such other agent) grants written permission to the Purported Holder to retain a portion of such Prohibited Distributions or sales proceeds not exceeding the amount that the Purported Holder would have received from the Exchange Agent (or such other agent) pursuant to Section 2.2(f)(ii). “

http://www.sec.gov/Archives/edgar/data/1084580/000119312512467573/d438735dex21.htm

You see, it is a very smart arrangement with their transfer agent. They would just mange the process so that ownership change for tax purposes does not happen. Leucadia’s deal tax experts (our own WEIL and others) know that SEC/IRS is OK with this temporary infringement. Only a well-versed practitioner could know these maneuvers.

“Following the transaction, 35.3% of Leucadia’s common stock will be owned by Jefferies’ shareholders (excluding the Jefferies shares owned today by Leucadia and including Jefferies vested restricted stock units). Leucadia’s Board of Directors has approved a new share repurchase program authorizing the repurchase from time to time of up to an aggregate of 25 million Leucadia common shares, inclusive of prior authorizations.”

http://www.businesswire.com/news/home/20121112005778/en/Leucadia-National-Corporation-Jefferies-Group-Merge

So the new shareholders would not create an equity structure shift by more than 50% collectively while none of these new shareholders would become more than 5% owner as indicated above in the arrangement with transfer agent to manage this possible infringement. So they covered all the bases yet sculpted a huge deal.
Leucadia already has ,just like WMIH, the restriction on 5 % ownership put through their article of incorporation. With this deal/merger, they would amend the articles.

“An amendment of the Corporation’s Certificate of Incorporation effected by this Certificate of Amendment to require the delivery of cash rather than capital stock of the Corporation to any target shareholder in an acquisition transaction if any person would become a “five percent shareholder” or be treated as owning more than 5% of the Corporation’s Common Stock for purposes of Section 382 of the tax code as a result of such target shareholder’s receipt of the Corporation’s capital stock in the acquisition transaction.”
(Exhibit B at the bottom of the merger document link posted above)

“f) Leucadia and the members of its affiliated group for U.S. federal income tax purposes reported NOLs of $4,874,617,427 for U.S. federal income tax purposes on their 2011 federal income Return and such reported amount is accurate in all material respects. The NOLs of Leucadia and its Subsidiaries are not subject, and will not be subject as a result of the Second Merger, to any limitation under Section 382 of the Code. The IRS has not asserted in any audit or, to the Knowledge of Leucadia, threatened to assert that the NOLs should be subject to limitation under Section 382 of the Code.”
(Page 29 of the merger document)

If there are ways around acquiring another company and keeping NOL intact (a straight forward and easier implication for WMIH), It is not far-fetched that process of tax free merger in which WMIH is acquired is also possible. By no means, I am trivializing the complexity of transactions, planning and possible delay that might come our way. That is why I call it a work of ART; did you guys appreciate the brush strokes in Leucadia deal?

All said and done , I want to wish once again Happy Thanksgiving to all and want to conclude this post by saying

YEAH BABY…

Hola a todos...este tema nos interesa y afecta MUCHO...

http://www.cotizalia.com/en-exclusiva/2012/11/24/pavor-a-las-tasas-las-empresas-usa-adelantan-el-pago-del-dividendo-para-esquivar-el-lsquofiscal-cliffrsquo-7079/

Hola Mr Simpson
No son los 8,37 Billion una ventaja fiscal neta?
El texto menciona "worthless stock DEDUCTION of approximately $8.37 billion"…
Es decir, creo que si tu abandonas acciones (sin valor) por un importe de X, tienes derecho a una DEDUCCION (por ello) de 0,35X , consecuentemente, si la deducción asciende a Y, el valor de las acciones abandonadas debería ascender a Y/0,35; en el caso que nos ocupa:
Si la deducción (que creo es una ventaja fiscal neta) es de 8,37 Billion, el valor de las acciones (sin valor) abandonadas debió ser de unos 23,9 Billion (8,37Billion/0,35), que (creo recordar) coincide aproximadamente con el valor de las acciones que Wamu tenía en WMBAnk (y que abandonó)
Sabemos que la deducción asciende a 8.37 Billion y "que da lugar a un NOL para el año actual” (“which gives rise to a NOL for the current year”);
No dice que el NOL al que da lugar coincida con el importe de la deducción.
Quizá estoy equivocado, me interesa mucho tu opinión sobre esto
Gracias de antemano

Hi Mr Simpson

The following lines are probably the most important, concrete, verificable and official information we have had since all this mess started 4 years ago.

From 10 Q, see page 16

http://www.sec.gov/Archives/edgar/data/933136/000119312512344418/d392232dex995.htm

On March 19, 2012, WMIHC emerged from bankruptcy. Prior to emergence, WMI abandoned the stock of WMB, thereby generating a worthless stock deduction of approximately $8.37 billion which gives rise to an NOL for the current year. Under Section 382 of the Internal Revenue Code, and based on our analysis, we believe that the Company experienced an “ownership change” (generally defined as a greater than 50 percent change (by value) in our equity ownership over a three-year period) on March 19, 2012, and our ability to use our pre-change of control NOLs and other pre-change tax attributes against our post-change income was limited. The Section 382 limitation is applied annually so as to limit the use of our pre-change NOLs to an amount that generally equals the value of our stock immediately before the ownership change multiplied by a designated federal long-term tax-exempt rate. Due to applicable limitations under IRC Section 382 and a reduction of tax attributes due to cancellation of indebtedness, a portion of these NOLs were limited and will expire unused. We believe the total available and utilizable NOL carry forward at March 19, 2012 is expected to be approximately $5.96 billion. These NOLs will begin to expire in 2030. The Company’s ability to utilize the NOLs or realize any benefits related to the NOLs is subject to a number of risks.

Let´s see a few words from that paragraph

“worthless stock deduction of approximately $8.37 billion ” …

I think that we ( as a company or corporation) had stock in WMBank, and before the abandonment, that stock's value was X.
Then when it became worthless we abandoned it and we had a stock loss of X (that loss will be ordinary loss or not (OL or not) depending on the law and on the IRS) which generates a worthless stock deduction of 0,35X ( being the deduction a net tax advantage)

I think that in our case the worthless stock deduction was 8,37 Billion and the amount of stock abandoned was 23,914 Billion, I mean the loss we had abandoning the stock was 23,914 Billion and the deduction ( it generated) was 23,914*0,35 = 8,37 Billion ( being the deduction a net tax advantage)

I also think that in our case ( according to the law and the IRS) the loss (and also the deduction and the net tax advantage) was ordinary, which is paramount for the potential buyer because it can be used to compensate ordinary ( and not specific) gains

“……which gives rise to an NOL for the current year” …
different to

“We believe the total available and utilizable NOL carry forward at March 19, 2012 is expected to be approximately $5.96 billion”…

Mr Simpson,

Do you think the 8,37 Billion deduction are a net tax advantage?

Are the 5,96 Billion (NOL carry forward ) another (and different) tax advantage we have to add to the 8,37 Billion (NOL for the current year)?

Is the net tax advantage from the 5,96 Billion (5,96 * 0,35) 2,086 Billion?

Is our total net tax advantage 8,37 Billion + 2,086 Billion, this is 10,456 Billion?

Your input would be really very appreciated,
Thanks in advance

PLR 201228023

IRS released PLR 2012280233 concerning the federal income tax consequences of the liquidation of a consolidated group ("Taxpayer Group"). Taxpayer Group had a consolidated NOL and subsequently, Taxpayer and several of its affiliates ("Debtors") filed for Chapter 11 bankruptcy. Under the final bankruptcy plan ("Plan"), a plan trust was created and all of Taxpayer’s stock was cancelled. The plan trust provided for the issuance of one share to be issued and held for the benefit of each former shareholder consistent with their former entitlements. After the Plan’s effective date, Taxpayer, as the plan administrator, was to wind down and liquidate Debtor assets. Though unlikely, the Plan preserved the Taxpayer’s shareholders’ right to receive a distribution in proportion to their previous stockholdings. The Debtors will ultimately be dissolved.

The IRS ruled that, under Section 382(g), there was no owner shift where the stock held in the plan trust stock replaced Taxpayer’s stock. Further, claims retained and interests received by the Debtors’ creditors are not "stock" for purposes of Section 382.4

Section 382(l)(5)(A) is an exception to the Section 382 limitation on using NOLs and applies where a loss corporation is under jurisdiction of a court in a "title 11 or similar case" and when the loss corporation’s shareholders and "qualified creditors" (as a result of their status as shareholders and qualified creditors) after the ownership change own at least 50 percent of the loss corporation’s stock (measured by both voting power and value).

Although Section 382(l)(5)(A) preserves the use of NOLs after an ownership change, there are several significant drawbacks. First, the pre-change losses and excess credits are recalculated as if no deduction was permitted for interest paid or accrued by the old loss corporation on debt that was converted into stock under a title 11 case for the part-year in which the change occurs and the three prior years.5 Second, usually when determining cancellation of indebtedness income, where corporations transfer stock to creditors to satisfy the debt, the corporation is treated as satisfying the debt to the extent of the stock’s fair market value. However, where the Section 382(l)(5) bankruptcy exception applies, the corporation does not account for indebtedness for interest paid or accrued during the year of change and the three prior years.6 Third, if there is a second ownership change during the following two-year period, the second change does not qualify for the Section 382(l)(5)(A) exception and the Section 382 limit is zero.7 Last, the stock must be transferred to a creditor in satisfaction of indebtedness, which was either held by the creditor for 18 months before the title 11 proceedings or are ordinary-business-trade creditors.8

Pepper Perspective

The Taxpayer in this PLR seems to have received a unique result because it arguably received the benefits of the Section 382(l)(5) bankruptcy exception without any of the associated drawbacks. Under the PLR, the Taxpayer was allowed to avoid the Section 382 limitation because the IRS found there was no ownership change as a result of the IRS determination that the interests the creditors might receive are not "stock" for Section 382 purposes.

We note that bankruptcy scenarios are typically analyzed under Section 382(l)(5). Here, however, because of the complex litigation present in the Taxpayer’s facts, the nature of the assets held, and the depressed financial markets that the Taxpayer is subject to, it was apparently sufficiently unclear as to the exact interest in the Taxpayer that the creditors were receiving when the Plan was confirmed. Thus, the IRS may have assumed that, since the interest was unclear, no stock was conveyed and therefore, a traditional Section 382(l)(5) analysis was not required.

If we assume that optin-optout decision regarding 382 (l) (5) does not have to be made at the effective date of reorganization, rather there is flexibility to make a final determination when the tax filing is prepared for the year 2012.

Then your theory of smoke and mirrors based on "we believe" stands some scope of speculation.

But one has to clarify a few bottlenecks. Do the special rules apply in chapter 11 bankruptcy? In other words, Are there only two choices 382 (l) (5) and (l) (6)?

If so, then the eligibility for 382 (l) (5) has to be evaluated.

"Section 382(l)(5)(A) is an exception to the Section 382 limitation on using NOLs and applies where a loss corporation is under jurisdiction of a court in a "title 11 or similar case" and when the loss corporation’s shareholders and "qualified creditors" (as a result of their status as shareholders and qualified creditors) after the ownership change own at least 50 percent of the loss corporation’s stock (measured by both voting power and value)."

Do the old shareholders have 50 % ownership ( I am assuming, under this exception, that 5% owner increasing/decreasing by 50% does not apply here, otherwise theory becomes all the more complicated) in WMIH. All I am considering is equity structure shift of less than 50%. It is hard to conceive as TPS had 4 billion worth of securities outstanding .... but it would be close. Does anybody have the division of equity (WMIH) handy by q, p, k, and hq?

Do the WAMPQ which were convertible preferreds count as making the base for old equity? Would P and commons combined would claim a 50% of WMIH equity (probably not). We have to see that percentage just before reorganization. Could that take us to 50%, I see no other way.

The only puzzling factor that might instinctly lead one to theory of hidden pre-change NOL is that there has been apparently a clear attempt to suppress the accountability of pre-loss NOL whether it is filed documents or court proceedings except the filing by Ben Mason. All parties including EC have participated in this "ignorance" knowingly or otherwise.

If by some miracle or "predetermined plan" Section 382(l) (5) applies.

The unrestricted NOL would be much much higher than 6 billion. Interestingly, 6 billion as wortless stock deduction would stand unaffected as that tax attribute was created during the year of change hence special rule applies.

Resumiendo... WMIH podria estar esperando un PLR (Private Letter Ruling)

http://www.investopedia.com/terms/p/plr.asp