Since Judge W attended this conference as a panelist, perhaps we can gain some understanding on her perspective.
American Bankruptcy Institute
2008 Winter Leadership Conference
Rule 9019 Settlements and the Confirmation Process:Favored Negotiation or the New Cram Down?
Section 1129(a) requires a finding by the court that the debtor has complied
with all Code requirements, that the plan was proposed in good faith, that the plan is feasible, that each creditor will be paid at least as much as it would have received in a Chapter 7 case, and that priority claims are paid in full.
C. Rule 9019.Settlements of disputed claims allow the judicial system to function more efficiently. “In Chapter 11 bankruptcies, settlements also help clear a path for the efficient administration of the bankruptcy estate, including any eventual plan of reorganization.” But before a pre-plan settlement can take effect, it must be approved by the bankruptcy court pursuant to Federal Rule of Bankruptcy Procedure 9019 Rule 9019(a) provides that, “[o]n motion by the trustee, after notice and a hearing, the court may approve a compromise or settlement.” The purpose of Rule 9019 is to “prevent the making of concealed agreements which are unknown to the creditors and unevaluated by the court.” Courts have developed standards for deciding if a settlement is fair and equitable. In the Second Circuit, the factors for settlement approval are based on the original framework set forth in TMT Trailer Ferry, Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. The Second Circuit factors are:
(1) the balance between the litigation's possibility of success and the settlement's
The Third Circuit considers the following four factors in deciding whether to approve a settlement:
(1) the probability of success in litigation;
(2) the likely difficulties in collection;
(3) the complexity of the litigation involved, and the expense, inconvenience, and
delay necessarily attending it; and
(4) the paramount interest of creditors.3
When a Rule 9019 compromise is considered within the context of a reorganization plan, some jurisdictions also consider “the extent to which the settlement is truly the product of arms-length bargaining, and not of fraud or collusion.” Further, the courts have “consistently rejected compromises proposed by self-interested parties.”
My lay-person’s thoughts: If the absolute priority rule is to be applied, I would surmise that it only applies to those invested in WMI to include bondholders and shareholders. In that light, I do not see how a settlement agreement can include gifting “estate assets and funds” to JPM or the FDIC because that would directly violate the “absolute priority rule”. I also read that we cannot receive any less than that which would be adjusted and provided under liquidation via Chapter 7 rules.
Larry.. I hear ya and that is another issue indeed! Somehow what he did was technically legal or Judge W would have slammed down her hammer (probably on Rosen's head!)... or...perhaps she had to wait for an objection. I have no idea.
Perhaps one of our resident experienced experts can shed some light on that subject. (Please...)
The POR release today is nothing more than the in-depth official document for the same “proposed settlement agreement” that Rosen outlined on the 12th.
From a reality standpoint, this event means that the negotiations can officially begin. Judge W has sanctioned the EC with intervention powers and has proven that she will enforce the rules. The EC is now free to fire at will. The real settlement talks are on and that is a good thing. The battle begins!
This reinforces our belief that the plan is only a starting offer because it clearly violates the priority scheme which is the bankruptcy court’s most important consideration when determining if a settlement is fair and equitable under Rule 9019.
If the plan is submitted as presented in court, I suspect the good and wise Judge Walrath will begin encouraging the parties by swiftly rejecting the plan and awarding the deposit money to WMI so that the parties are more encouraged to settle. At that point, JPIG will lose their leverage and the Bair Witch will realize things are going to get worse before they get better and she shouldn't have trusted Jamie. They will soon feel the awesome power of our judicial branch of government.
Long and Steady Freddy
Hello all the longs, we need to find a way to get this kind of research to our EC team. This way they are armed to the teeth.
I have seen some great material that is being shared / published. We can save our EC team lots of time, Money and add our collective brain power to fight this case ..
Is some one out there to take on this task..
Thanks for your find.I agree with you that this just shows that venable just need to move firmly against the Debtors and ask for the Court to cram down on them.I think J Walrath will intervene and take the case and the whole WAMU POR from the hands of the debtors and set some orders as SJ decision and give the right to Reinstate a new BOD throught democratic Election of them and give some fire to the debtors by Fining them.
Welcome.. There is a lot in it. I am sure that others can pick out some more relevant points. The "cram-down" issue is a bit confusing, to me at least. Seems as if the parameters for defining its usage are somewhat flexible and interdependent on surrounding factors and legal perspectives.
This is key:
"that each creditor will be paid at least as much as it would have received in a Chapter 7 case".
EQUITY would receive more under a Chapter 7, than under the current "proposed" settlement.
Why would Rosen even propose such a stupid plan in court on March 12th?
He had to have known that it violtated the absolute priority rule?
My guess is he was trying to help tank the price of WMI equity in order to strengthen the creditors baragianing postion.
Of course the SEC will sit on the sidelines with their heads up their @$$es even though Weil and Rosen have been about as blatant as you could ever be in terms of stock price manipulation.....IMO.
it was definitely done in BAD FAITH and I would like to see how his justification for rewarding FDIC and JPM.
what is his reasoning? what have they got on him for intending to pay them up and have major claims against them that were brought up in court disappear, and to pay them on top of this? ridiculous!!!