This must be the number one question: is the $6 Billion net value of the NOLs or is that gross value (before tax rate adjustment and sale discount)??
That is the single most important piece of info that will make this deal a good or bad deal. The new co with $6 Bil gross NOLs will only be worth approx $2.3 Bil (I got this from Jberg's post). New co with $6 Bil net NOLs will be worth approx. $6 Bil !!! Can we ask the EC to provide clarification letter with respect to this question. EC/Susman worked hard to get a deal, they should help us understand why this is a good deal so we can vote accordingly.
Now I am confused. I always thought that based on $17.7 Bil NOLs and at 35%, that is how they come up with the approx $6 Bil NOLs VALUE.
So you are saying, there is two NOLs one being $17.7 Bil, the other one being $6 Bil?
Just to be clear, I will say it one more time, since people seem to be hearing only what they want to hear rather than the complete picture:
The $17.7 billion NOL is not the same NOL as the Debtor's quoted $6 billion NOL. These are two entirely different NOLs, and one is not the cash value of the other. In fact, the whole idea of a "cash value" is somewhat suspect unless you can find income to use the NOLs. There are ways to use them, but for the most part it comes down to finding income which ordinarily would be subject to taxes, and using the NOLs to offset them.
But tax avoidance cannot be the primary objective of a Plan, as that would render it unconfirmable. The goal is, and should always be, to grow reorganized WMI into a profitable entity, making smart business decisions along the way. Reorganized WMI's tax benefits should make that growth easier, but they certainly should not be the primary decision driver going forward.
Just to clarify, the $2.1 billion maximum value I quoted is based upon a number of assumptions. The key assumptions are:
(1) $6 billion unrestricted NOL;
(2) 35 percent Federal tax rate;
(3) $6 billion in profits to by offset by (1).
To challenge these assumptions, keep in mind that I have argued that the unrestricted NOL could be over $23 billion if truly maximized, potentially increasing the value. The tax rate does not include state taxes, which could further increase the value. On the other hand, reorganized WMI does not yet have the profits needed to offset even $6 billion in NOLs, potentially reducing the value.
An acquirer certainly would want a discount, and that discount would be determined in large part by their estimate of how much of the NOLs they could use, and how long it would take to use them.