Apparently the disclosure statement failed to provide some material information regarding a GE note that current Class 1 creditors feel should be treated as a equivilant claim. The court has allowed class 1 to amend their vote and it seems as if they will end up rejecting the plan. The vote is scheduled for November 20th.
The Judge specifically ruled that the Committee did not make any showing of a "material" omission in the plan. She also noted that the Committee provided no legal authority to allow a "re-vote" She stated that, if the Committee feels there is a Plan that is better than the Pre-Pack, then they should focus their time on submitting an alternative plan. Her tone remains skeptical. All in all, this is a GREAT result and shows that we are on track for confirmation in December!
My reading/reaction of the papers is as follows: (a) the motion is on for the Nov. 20th; (b) the motion asks to allow certain holders to re-vote; (c) the arguments made by the committee are very weak; (d) I fully expect the judge to deny this application.
Incidentally, I also believe strongly that the "committee" that is supposed to be looking after all classes equally, is acting completely irresponsible and is absolutely abusing this process and committing a breach of their fiduciary duties to many investors. Not worth filing an injunction or suit at this point because, although disruptive, I expect the efforts to fail. But, if this train derails because of the selfish acts of the Committee, I will lead the charge against the Committee, guaranteed.
One issue with the committee, is that IMO they are perhaps more concerned about setting legal precedent than actually maximizing the recovery for trust pref holders. Wilmington Trust is the trustee for hundreds of debt issues. They may not want to see equity emerge with any value (even if it makes sense due to the tax loss issues) while debt holders are taking a big haircut. They may be opposed to the prepack based on broad principles.
I don't think that Valstone and other potential equity investors would be willing to invest without the 200 mil tax loss carryforward. It's kind of nuts for the committee to be going after a 15 mil slice to to the equity which allows that to be retained.
I think it all comes down to the capital raise. Even if one class votes against the plan, can the judge still confirm it based on the majority of the classes?
A good recent article from American Banker (sent the link to my subscribers, but can't post it here as yahoo no longer allows links to be posted) discusses the Q3 results and the efforts to raise capital. As noted in the article and as I posted earlier, the 10Q indicates that they need to add capital to the New Mexico operating bank by 12/20 to prevent it from being seized. If they don't complete the capital raise or the pending bank sale prior to that date, then they would most likely scrap the pre-pack and try to obtain DIP financing to meet that deadline.
As noted in the article, they had a smaller loss (especially if you exclude the holding co items) and improving asset quality in Q3. The article notes that the judge could confirm the plan if they have substantial capital committments, even if not all required have been received. A resolution of the fiscal cliff issues in Washington would go a long way towards helping them raise capital. I think the Q3 report may have helped. Potential investors were probably waiting to see how they did in Q3.
Assuming that they can raise additional capital to go with Valstone, it's hard to see any way forward for the company or creditors other than the company's plan. They will need to put more money from the holding co into Arizona and a couple of other operating banks by the end of the year. A bank sale gives them maybe until the end of Q1. Michigan Commerce profits must stay at that unit. An FDIC seizure of any operating bank would damage the creditors badly.
Let's hope the creditors don't overplay their hand. There really is no other alternative, especially given the tight deadline that things are on. I think the judge will recognize this.
I called CBC, talked to Angi. She advised that Court hearing is on December 4th and they still have not raised enough money. She was very closed mouth about giving any further info. Just thought to post