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Exhibit 99.1

In re Washington Mutual, Inc., et al.

Case No. 08-12229 (MFW)

OFFICE OF THE UNITED STATES TRUSTEE - REGION 3

POST-CONFIRMATION QUARTERLY SUMMARY REPORT

This Report is to be submitted for all bank accounts that are presently maintained by the post confirmation debtor.

 

Debtor’s Name: Washington Mutual, Inc., et al    Bank: Various
Bankruptcy Number: 08-12229 (MFW)    Account Number: Various
Date of Confirmation: February 23, 2012    Account Type: Various

Reporting Period (month/year):     October 1, 2018 through December 31, 2018

 

Beginning Cash Balance:

   $ 25,659,189  

All receipts received by WMI Liquidating Trust (“Trust”) on behalf of the Debtors:

  

Cash Sales / Interest:

   $ 135,717  

Collection of Accounts Receivable:

   $ 0  

Proceeds from Litigation / Settlement:

   $ 0  

Sale of Debtor’s Assets:

   $ 0  

Other Cash Receipts /Transfers:

   $ 91,133  

Total of cash received:

   $ 226,850  

Total of cash available:

   $ 25,886,039  

 

Less all disbursements or payments (including payments made under the confirmed plan) made by the Trust:   

Disbursements made under the plan, excluding the administrative claims of bankruptcy professionals:

   $ 0  

Disbursements made pursuant to the administrative claims of bankruptcy professionals:

   $ 1,220,703  

All other disbursements made in the ordinary course:

   $ 496,632  

Total Disbursements

   $ 1,717,335  

Maturity (Purchase) of Short-term Investments as allowed by U.S.C. Section 345(b) and the Liquidating Trust Agreement

   $ 43,911  

Ending Cash Balance:

   $ 24,212,615  

Pursuant to 28 U.S.C. Section 1746(2), I hereby declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief.

 

1/30/19

     

/s/ John Maciel

     

Chief Financial Officer

Date

  

        

  

Name/Title

  

        

  


WMI Liquidating Trust

December 2018 Quarterly Summary Report — UNAUDITED

TABLE OF CONTENTS

 

Page

 

Description

  1

  Background/Disclaimer

  3

  Schedule of Cash Receipts and Disbursements—Quarterly

  4

  Schedule of Cash Receipts and Disbursements—Cumulative

  5

  Statement of Net Assets in Liquidation (Balance Sheet)

  6

  Statement of Changes in Net Assets in Liquidation (Income Statement)

  7

  Notes to the Financial Statements

11

  Rollforward of Liquidating Trust Interests

12

  Next Dollar Analysis — December 31, 2018

13

  Rollforward of Disputed Claims Reserve


BACKGROUND / DISCLAIMER

This Quarterly Summary Report of WMI Liquidating Trust (the “Trust”), as successor-in-interest to Washington Mutual, Inc. (“WMI”) and WMI Investment Corp. (together referred to as the “Debtors”), to the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”) covering the period from October 1, 2018 through December 31, 2018, was prepared solely for the purpose of complying with the quarterly operating guidelines as described in the Chapter 11 Trustee Handbook, United States Department of Justice, May 2004 in accordance with 28 U.S.C. §1746(2). This Quarterly Summary Report is limited in scope, covers only a limited time period, and is not intended to serve as a basis for investment in any security of any issuer. This Quarterly Summary Report was prepared in accordance with liquidation basis accounting. The financial data reflected in this document is not audited or reviewed by an independent registered public accounting firm and is subject to future adjustment and reconciliation. Given its special purpose and limited scope, this report does not include all adjustments and notes that would be required to be reported in accordance with U.S. Generally Accepted Accounting Principles as adopted by the Financial Accounting Standards Board (“FASB”). Results set forth in the Quarterly Summary Report should not be viewed as indicative of future results. This disclaimer applies to all information contained herein.

On September 26, 2008 (the “Petition Date”), the Debtors commenced voluntary cases under chapter 11 of title 11 of the United States Code with the Bankruptcy Court. Prior to the Petition Date, on September 25, 2008, the Director of the Office of Thrift Supervision appointed the Federal Deposit Insurance Corporation (the “FDIC”) as receiver for Washington Mutual Bank (“WMB”), a subsidiary of WMI, and advised WMI that the receiver was immediately taking possession of WMB’s assets. Immediately after its appointment as receiver, the FDIC sold substantially all the assets of WMB, including the stock of Washington Mutual Bank fsb, to JPMorgan Chase Bank, National Association (“JPMC”), pursuant to that certain Purchase and Assumption Agreement, Whole Bank, dated September 25, 2008.

The Bankruptcy Court confirmed the Seventh Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code that the Debtors filed with the Bankruptcy Court on December 12, 2011 (and as subsequently amended and modified from time to time, the “Plan”), by order, dated February 23, 2012 (the “Confirmation Order”) [D.I. 9759]. After the satisfaction or waiver of the conditions described in the Plan, the transactions contemplated by the Plan were consummated on March 19, 2012 (the “Effective Date”), and, on March 23, 2012, the Debtors made initial distributions to creditors pursuant to the Plan (the “Initial Distribution”). WMI emerged on the Effective Date as a newly reorganized company, WMIH Corp. (formerly known as WMI Holdings Corp, “Reorganized WMI”).1

In addition, the Plan provided for the creation of the Trust, which was formed on March 6, 2012, pursuant to the execution of a liquidating trust agreement, dated March 6, 2012, by and among the Debtors, William C. Kosturos, as the liquidating trustee (the “Liquidating Trustee”), and Delaware Trust Company (formerly known as CSC Trust Company of Delaware) as the Delaware resident trustee (the “Resident Trustee”) (as amended, the “Liquidating Trust Agreement”). On or shortly after the Effective Date, certain of the Debtors’ assets were transferred to the Trust for the benefit of those stakeholders who were not paid in full in the Initial Distribution or whose claims remain disputed. The Trust is a successor-in-interest to the Debtors pursuant to the Plan and the Liquidating Trust Agreement. The Trust had an initial term of three years from the Effective Date, subject to extension for up to an additional three (3) years (subject to certain limited exceptions) with the approval of the Bankruptcy Court. On January 5, 2015, the Trust filed a motion for an order authorizing a three-year extension of the term of the Trust (the “Extension Motion”). On January 23, 2015, the Extension Motion was approved by the Bankruptcy Court, extending the Trust’s term for a period up to March 19, 2018. Administration of the Trust is not complete, with claims remaining to be reconciled and certain assets remaining to be collected. Accordingly, the Trust filed a request with the Internal Revenue Service and on November 21, 2017, the IRS notified the Trust that extension of the Trust’s term will not adversely affect the determination that the Trust is a liquidating trust and ruled that the term of the Trust may be extended up to an additional three years (i.e. through March 19, 2021). Thereupon, the Trust filed a corresponding motion with the Bankruptcy Court to extend the term of the Trust to such date. On December

 

1 

The Trust understands that WMIH Corp changed its name to Mr. Cooper Group, Inc. on or about October 9, 2018.

 

1


20, 2017, and without objection of any party, the Bankruptcy Court approved the motion to extend the term of the Trust.

As successor-in-interest to WMI, the Trust bears the responsibility for reporting to the Bankruptcy Court. The Trust reports in accordance with liquidation basis accounting, which requires the reporting entity to report its assets and liabilities based on net realizable values, or the cash the Trust expects to receive for its assets. For purposes of the Quarterly Summary Reports, management has used the fair market values assigned to the assets for tax reporting purposes. Valuation of assets requires management to make difficult estimates and judgments. Estimates necessarily require assumptions, and changes in such assumptions over time could materially affect the results. Due to the inherently uncertain nature of estimates and underlying assumptions, the actual cash to be received by the Trust from liquidation of assets and liabilities will likely be different than reported. Ongoing adjustments and reconciliations will be reflected in future Quarterly Summary Reports filed with the Bankruptcy Court (which the Trust files with the U.S. Securities and Exchange Commission, or “SEC,” under cover of Form 8-K), and in the Trust’s modified annual report on Form 10-K filed with the SEC for each fiscal year ending December 31.

The information provided in the notes to the financial statements is provided to offer additional information to the readers of this report. However, the information is not complete and should be read in conjunction with the Plan and Disclosure Statement. In addition, readers are encouraged to visit the Trust’s website at www.wmitrust.com, which contains links to the Trust’s filings with the SEC and documents filed with the Bankruptcy Court, including the Plan and Disclosure Statement.

 

2


WMI Liquidating Trust

December 2018 Quarterly Summary Report - UNAUDITED

Schedule of Cash Receipts and Disbursements – Quarterly

 

     For the Quarter ended December 31, 2018  
     Cash     Litigation Reserve      Disputed Claim
Cash
     Restricted Cash      Total  

Beginning Cash - September 30, 2018

   $ 9,845,948     $ —        $ 15,813,241      $ —        $ 25,659,189  

Receipts

             

Interest /Investment Income Received

     48,414       —          87,303        —          135,717  

Treasury Bill accretion

     —         —          —          —          —    

Sale / Monetization of Debtor’s assets

     —         —          —          —          —    

Collection of tax receivable

     —         —          —          —          —    

Proceeds from Litigation

     —         —          —          —          —    

Proceeds from run-off notes

     —         —          —          —          —    

Reimbursement for tax professional fees

     23,163       —          —          —          23,163  

Distribution from subsidiaries

     —         —          —          —          —    

Other receipts

     67,970       —          —          —          67,970  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total Receipts

     139,547       —          87,303        —          226,850  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Transfers

             

Disallowance of disputed claims

     —         —          —          —          —    

Allowance of disputed claims

     —         —          —          —          —    

Allowance of unreserved claims

     —         —          —          —          —    

Distribution to disputed Liquidating Trust Interests

     —         —          —          —          —    

Claims disallowed for non-release

     —         —          —          —          —    

Release from litigation reserve

     —         —          —          —          —    

Other transfers

     —         —          —          —          —    
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total transfers

     —         —          —          —          —    
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Disbursements/Payments

             

Disbursements to allowed claimants

             

Disbursements to Liquidating Trust Interests

     —         —          —          —          —    

Disbursements to newly released / allowed claims

     —         —          —          —          —    

Other disbursements to allowed claimants (taxes, releases, etc)

     —         —          —          —          —    

Disbursements made for bankruptcy expenses

             

For services prior to the effective date

     —         —          —          —          —    

For services after the effective date

     1,220,703       —          —          —          1,220,703  

Disbursements in ordinary course:

             

Salaries and benefits

     305,748       —          —          —          305,748  

Travel and other expenses

     22,937       —          —          —          22,937  

Occupancy and supplies

     53,126       —          —          —          53,126  

Other outside services

     2,498       —          —          —          2,498  

Other disbursements

     42,324       —          —          —          42,324  

Trust Advisory Board fees and expenses

     70,000       —          —          —          70,000  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Disbursements in ordinary course

     496,632       —          —          —          496,632  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total Disbursements

     1,717,335       —          —          —          1,717,335  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Change in Short-term Investments

             

Maturity/(Purchase) of US. Gov’t Securities

     (245,592     —          289,503        —          43,911  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending Cash and Cash Equivalants

     8,022,568       —          16,190,047        —          24,212,615  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Ending Short-Term Securities

     19,979,884          51,947,790           71,927,674  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total Cash and Short-Term Securities

   $ 28,002,452     $ —        $ 68,137,837      $ —        $ 96,140,289  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

3


WMI Liquidating Trust

December 2018 Quarterly Summary Report - UNAUDITED

Schedule of Cash Receipts and Disbursements – Cumulative

 

     From the Effective Date through December 31, 2018  
     Cash     Litigation Reserve     Disputed Claim
Cash
    Restricted Cash     Total  

Beginning Cash - Effective Date

   $ 140,117,720     $ 20,000,000     $ 725,779,642     $ 53,738,857     $ 939,636,219  

Receipts

          

Interest /Investment Income Received

     756,730       —         1,197,427       10,158       1,964,315  

Treasury Bill accretion

     41,056       —         363,777       —         404,833  

Sale / Monetization of Debtor’s assets

     5,780,129       —         —         —         5,780,129  

Collection of tax receivable

     71,700,000       —         —         —         71,700,000  

Proceeds from Litigation

     26,649,429       —         —         —         26,649,429  

Proceeds from run-off notes

     53,865,340       —         1,648,734       —         55,514,074  

Distribution from subsidiaries

     3,876,211       —         —         —         3,876,211  

Reimbursement for tax professional fees

     1,542,967       —         —         —         1,542,967  

Other receipts

     7,019,203       —         12,626       904,514       7,936,344  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Receipts

     171,231,066       —         3,222,564       914,672       175,368,303  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transfers

          

Disallowance of disputed claims

     651,226,723       —         (651,226,723     —         —    

Allowance of disputed claims

     —         —         (62,541,649     62,541,649       —    

Allowance of unreserved claims

     (150,528     —         —         150,528       —    

Distribution to disputed Liquidating Trust Interests

     (52,008,569     —         52,008,569       —         —    

Claims disallowed for non-release

     14,213,262       —         —         (14,213,262     —    

Release from litigation reserve

     14,127,159       (14,127,159     —         —         —    

Other transfers

     1,527,305       —         —         (1,527,305     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transfers

     628,935,352       (14,127,159     (661,759,803     46,951,610       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Disbursements/Payments

          

Disbursements to allowed claimants

          

Disbursements to Liquidating Trust Interests

     763,657,582       —         —         (10,937,075     752,720,507  

Disbursements to newly released / allowed claims

     —         —         —         101,021,880       101,021,880  

Other disbursements to allowed claimants (taxes, releases, etc)

     44,004       —         —         11,520,334       11,564,338  

Disbursements made for bankruptcy expenses

          

For services prior to the effective date

     49,874,229       —         —         —         49,874,229  

For services after the effective date

     76,478,535       5,872,842       —         —         82,351,377  

Disbursements in ordinary course:

          

Salaries and benefits

     12,756,293       —         —         —         12,756,293  

Travel and other expenses

     379,496       —         —         —         379,496  

Occupancy and supplies

     2,951,500       —         —         —         2,951,500  

Other outside services

     1,952,374       —         —         —         1,952,374  

Other disbursements

     861,617       —         18,989       —         880,606  

D&O Insurance

     662,245       —         —         —         662,245  

Trust Advisory Board fees and expenses

     2,853,940       —         —         —         2,853,940  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Disbursements in ordinary course

     22,417,466       —         18,989       —         22,436,455  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Disbursements

     912,471,815       5,872,842       18,989       101,605,139       1,019,968,785  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Change in Short-term Investments

          

Maturity/(Purchase) of US. Gov’t Securities

     (19,789,755     —         (51,033,367     —         (70,823,122
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Cash and Cash Equivalants

     8,022,568       —         16,190,047       —         24,212,615  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Short-Term Securities

     19,979,884         51,947,790         71,927,674  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cash and Short-Term Securities

   $ 28,002,452     $ —       $ 68,137,837     $ —       $ 96,140,289  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

4


WMI Liquidating Trust

December 2018 Quarterly Summary Report - UNAUDITED

Statements of Net Assets in Liquidation

(Liquidation Basis)

 

     12/31/2018      Effective Date  

Assets:

     

Cash and short-term investments

   $ 28,002,452      $ 140,117,720  

Cash held in reserve for litigation costs

     —          20,000,000  

Cash and short-term investments - DCR

     68,137,837        725,779,642  

Other restricted cash

     —          53,738,857  
  

 

 

    

 

 

 

Total cash and and short-term securities

     96,140,289        939,636,219  
  

 

 

    

 

 

 

Global Settlement/Other taxes receivable

     5,300,000        96,000,000  

Runoff notes

     —          127,851,091  

Runoff notes held in reserve for disputed claims

     —          1,232,742  

Investment in subsidiaries

     —          3,715,263  

Prepaid expenses

     340,219        948,080  

Other assets

     53,564        2,285,732  
  

 

 

    

 

 

 

Total assets

   $ 101,834,072      $ 1,171,669,128  
  

 

 

    

 

 

 

Liabilities:

     

Pre-effective date liabilities

   $ —        $ 94,112,477  

Cash held for allowed claimants

     —          53,471,976  

Estimated costs to operate trust (See Notes 2 and 7 for further information)

     16,054,176        40,000,000  

Accounts payable

     —          6,123,945  

Accrued wages and benefits

     696,124        18,261  

Other accrued liabilities

     510,131        133,441  

Accrued liabilities - DCR

     2,265        —    
  

 

 

    

 

 

 

Total liabilities

     17,262,695        193,860,100  
  

 

 

    

 

 

 

Net assets in liquidation:

     

Net assets subject to disputed claims

     68,135,572        727,012,384  

Net assets available to Liquidating Trust Interests

     16,435,805        250,796,644  
  

 

 

    

 

 

 

Total net assets

     84,571,377        977,809,028  
  

 

 

    

 

 

 

Total liabilities and net assets

   $ 101,834,072      $ 1,171,669,128  
  

 

 

    

 

 

 

The accompanying notes are an integral part of this unaudited financial statement.

 

5


WMI Liquidating Trust

December 2018 Quarterly Summary Report - UNAUDITED

Statement of Changes in Net Assets in Liquidation

(Liquidation Basis)

 

     Quarter Ended
12/31/2018
    Cumulative to Date  

Net assets, beginning:

   $ 87,606,833     $ 977,809,028  

Income

    

Interest / Investment income

     540,338       36,511,017  

Litigation Proceeds

     —         28,514,199  

Earnings / (Losses) from subsidiaries

     —         160,949  

Recovery of/(Additional) pre-effective expense

     —         66,381,944  

Other income / (Expense)

     —         3,906,656  
  

 

 

   

 

 

 

Total income

     540,338       135,474,765  
  

 

 

   

 

 

 

Expenses

    

Payroll and benefits

     399,584       9,629,355  

Occupancy and supplies

     42,492       1,816,306  

Professional fees & services

     1,169,826       79,415,866  

Other expenses

     74,114       3,712,874  
  

 

 

   

 

 

 

Total operating expenses

     1,686,015       94,574,402  

Change in reserve for costs to operate trust

     1,889,779       (23,945,824

Litigation expenses

       5,875,843  
  

 

 

   

 

 

 

Added / (Reduced) Expense

     3,575,794       76,504,421  
  

 

 

   

 

 

 

Changes in Market Value

    

Global Settlement Agreement Receivable

     —         (19,000,000
  

 

 

   

 

 

 

Total changes in market value

     —         (19,000,000
  

 

 

   

 

 

 

Other items

    

Allowed Claims

     —         (62,541,601

Disbursement to Liquidating Trust Interests - cash

     —         (763,657,582

Disbursement to Liquidating Trust Interests - runoff notes

     —         (106,627,732

Other disbursements

     —         (381,080
  

 

 

   

 

 

 

Total changes in Net Assets

     (3,035,456     (893,237,651
  

 

 

   

 

 

 

Net assets, ending

   $ 84,571,377     $ 84,571,377  
  

 

 

   

 

 

 

The accompanying notes are an integral part of this unaudited financial statement.

 

6


NOTES TO FINANCIAL STATEMENTS

(Unless otherwise defined herein, all capitalized terms have the same meaning as defined in the Plan)

Note 1: Establishing the Trust

The Plan provides for the creation of the Trust. On or shortly after the Effective Date, certain of the Debtors’ assets were transferred to the Trust for the benefit of those stakeholders who were not paid in full as part of the Initial Distribution made on or about March 23, 2012, or whose claim was disputed or otherwise unresolved. The Trust is and will continue to be responsible for liquidating, converting to cash, and distributing the Trust’s assets to the Trust’s beneficiaries. The beneficiaries have received, and will continue to receive, under certain circumstances as specified by the Plan, beneficial interests in the Trust in exchange for their unpaid claims against or equity interests in the Debtors (“Liquidating Trust Interests” or “LTIs”). The LTIs are not transferable except by will, intestate succession or operation of law. The outstanding balance for LTIs as of December 31, 2018 is reported on the “Rollforward of Liquidating Trust Interests” included in this report.

Creditors who held unpaid claims as of the Effective Date and who were projected to receive recoveries under the Plan as of such date have received or will receive LTIs for their unpaid Allowed Claims entitling them to distributions from or by the Trust in accordance with the subordination provisions of the Plan. If distributions from the Trust become available to creditors and former holders of equity securities issued by WMI who provided timely releases in accordance with the plan, and have not received LTIs, additional LTIs will be issued to effectuate future distributions.

In addition, the Liquidating Trustee administers the Disputed Claims Reserve (“DCR”). Holders of claims that have not been allowed did not receive cash or LTIs as part of the Initial Distribution, and such assets were transferred to the DCR pending resolution of claims. Since the Effective Date, the DCR balances have changed due to the disallowance or allowance of disputed claims as well as payment on behalf of LTIs held by the DCR.

The Trust, as a liquidating trust, is intended to qualify as a grantor trust for U.S. federal and state income tax purposes. A grantor trust is generally not treated as a separate taxpaying entity (i.e., it is treated as a pass-thru entity); as such, we do not anticipate that the Trust will be subject to U.S. federal or state income taxation. See Note 4.

Note 2: Liquidation Basis Accounting

Given the liquidating nature of the Trust, management is reporting its financial statements using liquidation basis accounting, consistent with FASB Accounting Standards Codification (“ASC”) Topic 205-30 (“ASC 205-30”). Liquidation basis accounting may be considered GAAP for entities that do not intend to continue as a going concern.

Key elements of liquidation basis accounting as set forth in ASC 205-30 include:

 

 

Presentation of an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation.

 

 

An entity should recognize and measure its liabilities in accordance with U.S. GAAP that otherwise applies to those liabilities.

 

 

Instead of a balance sheet and income statement, the Trust provides a Statement of Net Assets in Liquidation and Statement of Changes in Net Assets in Liquidation. The Statement of Net Assets should report assets and liabilities at the amount of cash expected to be received or paid in liquidation. Such a report is inherently uncertain, as it is based on estimates and assumptions. The cash amounts actually received and paid could be materially different than the reported balances.

 

 

The entity is required to accrue and separately present the costs that it expects to incur, and the income that it expects to earn, during the expected duration of liquidation, including any costs associated with the sale or settlement of those assets and liabilities.

 

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On the Effective Date, the Trust recorded a liability (the “Operating Reserve”)2 of $40.0 million to operate the Trust. Due to the passage of time and the ongoing nature of certain litigation and claims reconciliation, the actual and expected operating costs have increased over time. As part of the Trust’s annual budgeting process for the 2019 fiscal year (and consistent with its prior practice), management reevaluated the ongoing operations of the Trust, including costs and expenses to litigate the Trust’s objections to remaining disputed claims, including the employee claims litigation (as discussed below in Note 7) and to monetize the Trust’s remaining assets. During the quarter ended December 31, 2018, the Trust incurred operating expenses of $1.7 million. Based on the approved budget and current conditions, management estimates total expenses for the remainder of the Trust to be approximately $16.1 million. Therefore, the Trust recorded an increase of $3.6 million to the Trust’s Operating Reserve for the quarter ending December 31, 2018. The Trust funded the increased operating reserve from accumulated excess cash. The Trust currently estimates total costs from the Effective Date through the end of the Trust, to be $110.6 million.

The Trust does not have predictable revenue-generating operations; therefore, in an effort to ensure that the Trust has adequate funds on hand to fund the possible increase in operational costs associated with, among other things litigating employee claims to final resolution, as of December 31, 2018, the Trust withheld $10.1 million from funds otherwise available for distribution. After giving effect to this additional “hold-back,” total funds available for operational purposes totals approximately $26.2 million.

Note 3: Distributions to LTI Holders

The Plan and Liquidating Trust Agreement provide that the Trust will make distributions on at least a quarterly basis, subject to the availability of distributable cash and certain exceptions. No excess cash was generated or received during the quarter. Therefore, while the next regularly scheduled Distribution Date is February 1, 2019, the Trust will not make a quarterly cash distribution to LTI holders on that date.

Note 4: Disputed Claims Reserve

From and after the Effective Date, the Trust retains, for the benefit of each holder of a disputed claim, cash, LTIs, as well as any dividends, gains or income attributable in respect of any of the foregoing. The amounts retained are calculated as if each of the claims were an Allowed Claim in an amount equal to the lesser of (i) the liquidated amount set forth in the filed proof of Claim relating to such Disputed Claim, (ii) the amount in which the Disputed Claim shall be estimated by the Bankruptcy Court pursuant to section 502 of the Bankruptcy Code and constitutes and represents the maximum amount in which such Claim may ultimately become an Allowed Claim, and (iii) such other amount as may be agreed upon by the holder of such Disputed Claim and the Liquidating Trustee; provided, however, that the recovery by any holder of a Disputed Claim shall not exceed the lesser of (i), (ii), and (iii) above.

Pursuant to the Plan and the Liquidating Trust Agreement, the Liquidating Trustee (A) treats the DCR as a “disputed ownership fund” governed by Treasury Regulation section 1.468B-9 (and will make any appropriate elections) and (B) to the extent permitted by applicable law, reports consistently with the foregoing for state and local income tax purposes. Accordingly, the DCR is a separate taxable entity for U.S. federal income tax purposes, and all distributions from such reserve are taxable to the reserve as if sold at fair market value. Any distributions from the DCR will be treated for U.S. federal income tax purposes as if received directly by the recipient from the Debtors on the original claim or equity interest of such recipient.

On the Statement of Net Assets, as of December 31, 2018, DCR assets include cash and investment securities of $68.1 million. The DCR, by reason of its allocable ownership of LTI assets on behalf of disputed claimants, is entitled to a pro rata share of the remaining assets of the Trust. Assets of the DCR will be made available to the LTI holders in accordance with the Plan as and when disputed claims become disallowed. For further information regarding the DCR, see the “Rollforward of Liquidating Trust Interests” and the “Rollforward of Disputed Claims Reserve” included in this report.

 

2 

On the balance sheet, the item titled “Estimated cost to operate trust” is herein referred to as “the Operating Reserve.”

 

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Note 5: Global Settlement Agreement / Other Taxes Receivable

Pursuant to the Plan and the Global Settlement Agreement with JPMC and the FDIC, the Trust and JPMC share in all future net tax refunds payable on account of consolidated federal income tax returns and on account of consolidated, combined, or unitary state returns filed by WMI and its subsidiaries (the “WMI Group”) for all tax years prior to 2009 on a 20% / 80% pro rata basis, respectively. On the Effective Date, there were two litigation actions pending with respect to claimed federal income tax refunds and there were several state tax refunds pending from certain states. An escrow account (the “Tax Refund Escrow”) was established to accumulate net tax refunds in accordance with the terms of the Global Settlement Agreement (“GSA”). Taking into account the results of tax litigation, and various other items including the close out of the Tax Refund Escrow account, the balance of $5.3 million represents management’s estimate of the activities remaining regarding other taxes receivable.

In prior years, WMI initiated several actions in the United States District Court of Western Washington at Seattle; the actions have been finalized with the court ultimately holding that WMI did not meet the burden of proof in determining the amount of refund to which it was entitled. In addition, WMI litigated a suit in the Court of Claims; the action was resolved with Court finding that WMI did not meet the burden of proof as to the value of acquired intangibles. The value of these tax litigations is now $0 and no further action is anticipated.

The State of Washington owes the Trust approximately $3.4 million of Business & Occupancy (“B&O”) tax refunds from 2004 and 2005. Such taxes were not paid by the WMI Group; therefore, such refunds are not subject to the allocation formula set forth in the GSA.

As of December 31, 2018, the estimated value of the asset is $5.3 million. While the value of the tax litigation is zero, the value of the B&O Tax refund, refunds received by the Tax Refund Escrow from the State of Illinois and the return of excess funds from the Tax Escrow are sufficient to support the valuation of $5.3 million.

Note 6: Disputed Equity Escrow

In addition to the DCR, the Plan established a Disputed Equity Escrow to hold shares of Reorganized WMI common stock for distribution based on the resolution of disputed equity interests. A dismissal of disputed equity interests will result in a distribution to common shareholders of Reorganized WMI consistent with the allocation of, and manner of distribution of, common shares on the Effective Date. The shares and any cash that may be distributed on behalf of the shares are held in a separate escrow account that is not recorded as an asset of the Trust. The Liquidating Trustee is the escrow agent for the Disputed Equity Escrow. The Disputed Equity Escrow is taxed in a similar manner to the DCR (see description above). All expenses of administering the Disputed Equity Escrow (other than taxes) are borne by the Trust. Costs incurred cumulative-to-date total $7,500.

On October 10, 2018, the Trust was advised that Reorganized WMI would execute a reverse 1-for-12 stock split that was approved by shareholders at a special meeting held on October 9, 2018. Prior to the stock split, the Disputed Equity Escrow held approximately 1.5 million shares; after the stock split was executed, on October 11, 2018, the Disputed Equity Escrow held 128,857 shares of Reorganized WMI.

As of December 31, 2019, 128,857 shares of Reorganized WMI common stock and a de minimus amount of cash, remained in the Disputed Equity Escrow.

Note 7: Employee Related Claims

As of December 31, 2018, the DCR held $66.6 million of cash in reserve on account of the Employee Claims, with the aggregate remaining amount of those claims totaling approximately $61.5 million. The DCR also holds $1.5 million as a reserve for employer taxes, should the employee claims be allowed.

 

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Based upon the respective decisions of the Delaware District Court and the D.C. District Court3, by motion, dated August 30, 2018, (the “Trust Motion”) the Trust asked the Bankruptcy Court to disallow the employee claimants’ claims, authorize the distribution of funds and interest accrued thereon in the DCR and, in the event such relief was granted, dismiss certain adversary proceedings against certain of the employee claimants. The employee claimants opposed such motion and cross-moved to seek an order of the Bankruptcy Court finding that the Trust is not a covered company under applicable federal banking regulations and to disregard the orders and decisions of the Delaware District Court and the D.C. District Court. At a hearing on October 16, 2018, following oral argument, the Bankruptcy Court granted the Trust Motion, finding that the decisions of the Delaware District Court and the D.C. District Court are binding on the Trust and all parties and that the Trust is prohibited from making payments on the account of the subject claims. The employee claimants requested and were granted leave to file supplemental briefs which purport to address their assertion that certain components of the employee claimants’ claims are not subject to the decisions of the D.C. District Court. The parties’ supplemental briefing was completed on January 25, 2019. The Bankruptcy Court indicated that it will take all matters under advisement and notify the parties if oral argument is required.

 

3 

For additional detail regarding the history of the Employee Claims Litigations, including the various filings and rulings made and/or received over time, please see Quarterly Summary Reports (each a “ QSR) filed by the Trust, including QSRs filed with respect to the quarter ended June 30, 2018 and prior.

 

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WMI Liquidating Trust

December 2018 Quarterly Summary Report — UNAUDITED

Rollforward of Liquidating Trust Interests (1)

 

    Beginning -
10/01/18
    Post Effective
Accretion
    Allowed     Disallowed     Disbursement     Other     Ending -
12/31/18
    12/31/18 -
02/01/19
Accretion
    Projected
02/01/19
Distribution
    Projected
Ending
Balance
 

PIERS (Tranche 4)

  $ 39,338,961     $ 191,959     $ —       $ —       $ —       $ —       $ 39,530,920     $ 66,988     $ —       $ 39,597,908  

Remaining Postpetition Interest Claim (Tranche 4) (2)

    10,204,431       49,794       —         —         —         —         10,254,225       17,376       —         10,271,602  

Allowed General Unsecured Claims (Tranches 2-4)

    565,227       2,758       —         —         —         —         567,985       962       —         568,947  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LTI balances - Current LTI holders

    50,108,619       244,511       —         —         —         —         50,353,130       85,327       —         50,438,457  

LTI balances - Disputed Claims (GUC)

    448,505       2,189       —       $ —         —         —         450,694       764       —         451,458  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL LTI Balances

  $ 50,557,124     $ 246,700     $ —       $ —       $ —       $ —       $ 50,803,824     $ 86,091     $ —       $ 50,889,915  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTES

 

*

Holders of Liquidating Trust Interests will receive statements of their individual LTI holdings outlining the respective rollforward activity through 02/01/19.

1)

Liquidating Trust Interests are not issued to holders of subordinated claims and equity interests. Additional LTIs will only be issued to holders of subordinated claims and equity interests if proceeds exceed the face amounts issued to current LTI holders.

2)

A Claim by a holder of an Allowed Senior Notes Claim with respect to Floating Rate Notes against any of the Debtors or the Debtors’ estates for interest accrued during the period from the Petition Date up to and and including the date of final payment of such Claim, in an amount equal to (a) such holder’s Postpetition Interest Claim minus (b) such holder’s Intercreditor Interest Claim.

 

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WMI Liquidating Trust

Next Dollar Analysis - LTI Balance as of December 31, 2018

 

Remaining Aggregate Distribution

 

Distribution Description

 

LTI Distribution Recipient (1)

 
Up to $50,803,824   Until LTI holders of Remaining Post-Petition Interest, PIERS and GUC are paid in full   Remaining Post Petition Interest Claim — Senior Floating     20.2
    General Unsecured Claims     2.0
    PIERS CUSIPs     77.8

NOTES:

 

(1) 

The disputed claims (on an “as if allowed” basis) are included in the General Unsecured Claims percentages.

 

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WMI Liquidating Trust

December 2018 Quarterly Summary Report - UNAUDITED

Rollforward of Disputed Claims Reserve

 

     Disputed
Assets (1)
     LTI (2)  

Beginning Balance - 09/30/2018

   $ 67,756,163      $ 448,505  

Post-effective Accretion on LTI portion

     —          2,189  

Net Cash Interest Earned on Disputed Assets

     379,409        —    

Cash Distribution to Disputed LTIs

     —          —    

Less: Allowed Claims

     —          —    

Less: Disallowed Claims

     —          —    
  

 

 

    

 

 

 

Ending Balance - 12/31/2018

   $ 68,135,572      $ 450,694  
  

 

 

    

 

 

 

NOTES:

 

1)

“Disputed Assets” includes cash held for the benefit of disputed claims.

2)

The face amount of unpaid claims which represents a claim against the general assets of the Trust, distributable in accordance with the subordination provisions of the Plan.

 

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