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Troy Racki

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  • The Wait Continues For WaMu Shareholders [View article]
    Reader's Digest Version: "WMIH is worth between $.375 and $5.875."

    If you are not interested in doing proper due diligence, stick with ETFs (exchange traded funds). Sufficient reading comprehension is required for those desiring of trading individual securities.
    Jul 24 07:20 PM | 1 Like Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]

    Feel free to trade shares however you wish and take on whatever risk that may entail. The court documents were rather explicit. Maybe there was an error in its writing. In that case it is up for the voting agent to issue a public notification restating the facts.

    I am not going to promote investors buying something when the court states that the final record date is Feb 9th in bold capital font. Consider this, had I told people it was fine to trade after the 9th and was wrong there would certainly be a lot more fall out than just you. All things considered I would rather err on the side of safety.

    That aside it looks like the buying opportunity you wanted did not work out given the direction shares have been trading. It would have been better to buy before the 9th than after now since prices are up 25%+. Note also that volume is declining, up to 70%.

    In closing, you are free to think I am wrong and you are welcome to your opinion. However I am not going to admit an error when there is sufficient documentation available that backs up my statements. If shares between the 9th and 28th get a distribution, my condolences for those people; they paid more than if they had acted before my article. If those shares do not get a distribution for whatever reason, my condolences for those people, they lost all of their money.

    People use Seeking Alpha to make money. That is everyone's goal here. Maybe you will be right in the end about the date. But who made more money, those before the 9th or after? +ROI is the true barometer of legitimacy here.
    Feb 16 02:06 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]
    I spoke to my broker in the reorg department. They said as soon as the shares hit your account they are yours. The 2-3 day settlement window is simply time for you to pay for those shares if you are buying them on margin because pink sheet stocks are non marginable and must be paid in full in 3 days. So if you buy on the 9th and even though it settles on the 12th, you still qualify for new common shares. Remember you need to get a ballot on your own and sent it into your broker by the 28th. (Some brokers want the ballot by the 22nd.) The ballot is the same as the voting ballot, you are simply granting the releases.
    Feb 8 07:24 PM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]
    The court seems pretty definitive about 2/9. I used the term "ex-date" loosely to describe when shares still trade where they can be changed into new common reorg stock. This isn't an actual dividend but a reorg. After the 9th shares no longer will be exchangeable for new common stock. Some have argued that this won't be the case so its up the individual if they want to gamble with shares past the 9th. However if the court denies the plan of reorganization then the 9th no longer applies.
    Feb 8 07:18 PM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]

    Short answer: Yes you will be eligible to receive the new shares if you grant the release by the deadline.

    Long Answer: It is very important that you follow through and be proactive with this. Here is why. Because you bought after the January 6th record date for determining ballot mailing you will NOT receive a ballot automatically. It looks like one is coming per your call to your broker but it may take up to a week to arrive. Alternatively you can acquire a ballot on your own. You can contact the voting agent KCC LLC directly to request a .pdf to be e-mailed to you. Or you can use a ballot that a shareholder posted online at:

    I have pre-screened the file and it is safe. All ballots are generic other than by CUISP. You need to send in the proper ballot for the shares you purchased. If you bought PQs ($XX.XX) use the above address. If you purchased KQs ($.XX) use:

    If you used a broker you will need to mail the ballot to your broker. Most of the brokers have a reorganization department. I would recommend calling your broker, ask for the reorg department, inform them of the purchase, and request the address to mail the ballot to. WAMUQ's Yahoo Message board has the addresses for E*Trade, TD Ameritrade, and Charles Schwab posted. Use the search function to search your broker name.

    Each broker has special instructions on filling out the ballot. Charles Schwab for example requests you write the account number on the first page of the ballot, fill out the ballot legibly, sign in two places, and mail only an original. Class 19 ballots are printed on yellow paper so I would recommend printing on yellow paper if possible to reduce any chance of confusion when a non colored ballot arrives at your broker.

    You are still eligible to receive the new company shares as long as you get everything into your broker before the Feb 28th court deadline. Some brokers are asking for a week before that, Feb 22nd to give them 6 days to pass a master file onto the court. I wouldn't wait that long. Try to get things in as soon as you can to allow for correction of any mishaps.

    Some shareholders are waiting after the Feb 16th confirmation to grant their releases for a distribution as an act of defiance against the court's "fair and reasonable" ruling and the poor settlement terms negotiated. That decision however would only then give you 6 days to get the paperwork done in time as some brokers that want the ballot by the 22nd. It is your call if you want to cut it that close.
    Feb 1 09:49 PM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]

    It is your call to do this and I wish you the best of luck. If you can get PQ shares for pennies and then a distrubtion of common stock worth dollars you are more than welcome to declare your great financial success on this thread.

    "Votes and elections cast by a [shareholder] through a [broker] by means of a Master Ballot/Master Election Form shall be applied against the positions held by such [broker] as evidenced by a list of record [shareholders] provided by The Depository Trust Company and compiled as of [2/9/12]; PROVIDED, HOWEVER, that votes and elections submitted by a [broker] on a Master Ballot/Master Election Form shall not be counted in excess of the position maintained by such [broker] as of [2/9/12];" 51(b) on p. 26.
    Feb 1 11:45 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]

    I used the term "ex-date" because it is a definition most investors understand well. There is no term for when a company is going to start trading ex-reorganization shares. The court names Feb 9th as the record date, others have termed it the securities date.

    If you wish to try to purchase shares after Feb 9th and still receive a distribution that is your prerogative. I would highly recommend against such as you may lose all your money related to that trade. I questioned both my broker and KCC LLC on the purchase of such shares and both reported that they could give no such recommendations due to liability concerns. I highly doubt TD Ameritrade is giving you the green light. The e-mail received is simply echoing what the ballots say, for your vote to count you need to be in by Feb 6th, to get a distribution it must be in by Feb 28th. If you get an additional response to your private e-mail that says you can still receive a distribution from shares purchased after the record date I would be very surprised for your broker to make that recommendation and wonder if they are misunderstanding your question.

    Individuals wanting to take a gamble against what the disclosure statement seems to make very clear may purchase such shares and could profit greatly but should be willing to accept the consequences if they do not receive a distribution. Likewise if WaMu's 3rd confirmation hearing should fail (highly unlikely) then a fourth plan will have to be submitted and shares purchased after the 9th will still have value.

    Bottom line: It is your money to spend as you wish. Shareholders who want new company shares are recommended to make their purchases on or prior to the 9th and get their release elections to the voting agent or the voting nominee on or before Feb 28th. Everything after those dates stops being investing and becomes pure gambling.
    Feb 1 11:17 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]
    Poor Dude,

    According to the disclosure statement the REIT preferred equity is lumped into Class 19 with the Series K (KQ) and Series R (PQ) shares. The judge has ruled that an exchange event occurred which separated the REIT shares from their HELOC assets. The HELOCs where then transferred to JP Morgan, resulting in a large profit for them. The exchange event then created new WaMu preferred stock which were given to the REIT shares to create a "like value" exchange. While the REITs received preferred stock with a face value of equal value to the HELOCs exchanged away the intrinsic value of those preferred shares was much lower. The problem is that without Washington Mutual Bank, Washington Mutual Incorporated has little immediate value.

    The reason for this arrangement was to help make selling the REITs more favorable. The exchange event gave the illusion of a contingency plan that had value in case of a worst case scenario. The less illusion of risk, then the less expense in acquiring capital.

    My table includes the REITs as being part of the company's total preferred shares. Without them Class 19 recovery value would double.

    Concerning the releases, they are part of a settlement amongst the various parties involved. Settlements give the judge the right to ignore things like the absolute priority rule and to decide that all things are "fair and reasonable". Basically it creates a rug under which everything can be swept including 5th Amendment rights. The judge believes there is no governmental abuse because the settlement is "fair". The settlement is "reasonable" because it resolves billions in fictitious claims against WaMu, a number which modulates between $50 and $100B depending on the day of the week, the direction the wind blows, and the willingness of professionals in providing misleading information. JP Morgan claims harm even though it has profited immensely and is willing to let WaMu go of that harm if WaMu gives it billions in tax refunds and other assets amounting to some $6 billion. The FDIC claims harm not because the FDIC lost any money but because the FDIC is trying to recover some $30B the WMB noteholders lost.

    While WaMu reported $307B in assets, the $188B were deposit liabilities to everyday depositors like you and me. The company also owed $63B to the Federal Home Loan Banks, $30B to creditors in the form of Washington Mutual Bank loans, and $8B to creditors of Washington Mutual Investments loans. That left the company with only $18B in value.

    With mark to market rules as the economy plunged, WaMu had to mark down the value of the homes it held as collateral. As that $18B cushion shrank WaMu tried to raise new capital however it had great difficulty in doing so because the world was on fire and everyone was running for the exits. Short sellers gladly poured gasoline on the fire and in late 2008 the world was on the verge of collapse. The FDIC seized WaMu while it was still worth something to someone and sold it to JP Morgan for a song. Suddenly TARP was approved and everything was magically better. The following May JP Morgan stated it would make $25B on WaMu's loan portfolio. Yes, it is amazing how mark to market rules work. So you know JP Morgan's CEO served on the Federal Reserve Board of New York. He had connections with the FDIC. The rest is the matter of friends helping friends.

    For a Hollywood explanation of WaMu watch the movie "Wall Street 2: Money Never Sleeps". The only difference is the CEO got caught because he was linked to a hedge fund which bet and profited off his rival company tanking. JP Morgan had full access to WaMu's books in March of 2008 under the guise of purchasing the company. Once JP Morgan knew WaMu's weakness it was a matter of exposing that weakness.

    JP Morgan denies any wrongdoing.
    Feb 1 02:08 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]
    Article Corrrection: For sake of clarity DIMEQ owners will receive 8.77% of the common shareholder distribution of up to 30%, or 2.631% of the reorganized company.

    It should also be noted that the judge can elect to change the stock distribution to such that preferred equity will receive more than 70% and common equity less than 30%, however this is unlikely.
    Feb 1 01:16 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]

    Share prices prior to the 9th are determined by what the reorganized company is worth to those who want to have ownership in such. Those owners also have to be willing to grant the releases that have been reached in mediation. The company will have $75M in cash and $10M in restricted securities (pending a full swap). I don't foresee the company making a dividend and giving out the cash assets. Instead WaMu is likely to purchase a company and re-grow itself to make the most use of its NOL assets. To not would be to throw money away. To avoid NOL restrictions the new company will likely remain private for a period of three years in order to avoid a possible 5% ownership change associated with re-listing. Since 3 years is an eternity to the market, share prices on preferred stock are trading above the company cash value but below the company cash + the court determined NOL value. I do not foresee prices falling below company cash value. Such would indicate that the market assumes the new board of directors will simply sit on their hands and burn off the company cash.

    After the 9th I sense WAMUQ.PK, WAMKQ.PK, and WAMPQ.PK will go into the penny range. I will stop reporting on the company because I do not want to give any potential investor the notion that the post ex-date shares have any value. Should the court change dates (highly unlikely) then I will continue to report where pertinent.

    I am currently penning my last article on WaMu and am expecting to release it early next week. Once the company goes private Seeking Alpha will not publish any further information on WaMu because private stock is "not actionable". Instead private stock is limited to the Instablog circuit which I have no interest in pursuing.
    Feb 1 01:15 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Steams Towards February 9th Ex-Date [View article]

    Here is what the disclosure statement says (pg. 259). Note the filing uses all caps to indicate the significance. They also use bold for "voting and election deadline" which does not copy and paste over.


    Boiling this down, "the record date for determining holders of preferred and common equity that may make elections (grant release ownership entitling a distribution of new common stock) is the same date as the voting and election deadline". The voting deadline is February 9th.

    The statement seems pretty definitive about what the ex-date is. The additional 17 days is to allow time for releases to be granted in case there are ballot delays in sending and receiving them by 2/9. For those purchasing shares on the 9th or just prior, it gives them 17 days to obtain a ballot and get it to the voting agent in time for a distribution.

    Sales of shares on the 8th will be a good indication of what the market believes the reorganized company to be worth based upon the information that has been publicly provided.

    Shares after the 9th will likely decline precipitously. You could gamble on making a purchase of these post record date shares and attempt to get a distribution but I would highly discourage such a risky bet.
    Feb 1 12:42 AM | Likes Like |Link to Comment
  • WaMu Junior Debt Recovery Becoming Unlikely [View article]

    The debtors had no incentive to resolve this case in a timely manner because the longer they take the more senior debt gets paid and the more professional fees that can be charged. The interesting thing is that since Jan 2010 estate assets have not appreciated any more. What the debtor should have done was made a settlement for all parties at that time. Instead they fought equity tooth and nail for nearly two years. The end result has ended up being the same except junior debt would have only had to pay $234M in intercreditor interest in Jan 2010, not $599M. However since 70% of the junior debt is held by hedge funds that are simply passing the interest from one pocket to their other pocket which holds senior bonds to doesn't really matter to the debtor. The only investors who end up losing are retail.

    It is regrettable that at one time the debtor said junior debt would receive a 74% recovery when that was never their intent. Consquently it is hard to make an intelligent investment when the information you are being provided is false or inaccurate.
    Jan 15 12:02 PM | Likes Like |Link to Comment
  • WaMu Junior Debt Recovery Becoming Unlikely [View article]

    Thanks for dropping in the additional information. I would agree that my intercreditor interest may be high. Only $6.547 billion in cash would be immediately available which would cover all of the senior notes pre+post claim, all the floating notes pre+post claim, but leave junior notes not fully satisifed. They carry the highest interest rate of all. One question was whether or not the junior post claim will acquire interest at FJR or CR. I assumed CR given the debtor's usual generosity. WaMu indicates it may take up to 6 months to solve $320M in disputed tax refunds and to sell $100M to $150M in liquidating trust assets but this may take even longer. I don't think they estimated trust management expenses either. There is also the possibility that the tax refund litigation may not resolve as estimated with a lesser settlement amount so total estate assets may actually decline. Professional fees may also end up being higher than estimated as well with all the litigation ongoing.

    As you metioned the disputed claim reserve is estimated at $850M but with the DIMEQ resolution this drops it to $513M, of which only $375M is planned for. I think final allowed claims of $57M is "pie in the sky" thinking by the debtor. Tranqulity and DIMEQ alone makes class 12 allowed claims $58.6M. WAHUQ's best hope for a recovery is that class 12 comes in below $375M but I can't see this happening when the debtor makes all of its projections on the conservative end and was wrong on Tranquility's $49.6M negative and the Anchor settlement which was a $20M positive suprise that took WAHUQ from a $74M to $94M recovery. I can't see the judge changing her Dec 20th opinion on Tranquility after she shot down DIMEQ and TPS in the manner she did and has stuck to her guns about the GSA being F+R despite all the objections and IT allegations. But it could happen.

    As for the 13% Runoff Notes its likely that senior noteholders will elect to take them all and the PIERS will see none. The notes are projected to raise $216M on $140M face by 2019, or a 6.8% yield. I can't see the seniors passing that up.
    Jan 14 11:16 AM | Likes Like |Link to Comment
  • Washington Mutual Reorganization Part 2: Fund Insider Trading Charges Prompt Mediation Order [View article]

    Thank you for your readership.

    For the most part, many companies in bankruptcy end with their stock being cancelled and after emergence they fail yet again. This is why most investors and analysts do not bother with these "broken" companies. However there are some situations where companies emerge from bankruptcy and go on to become successful once again.

    For example in K-Mart, the company had a massive real estate portfolio that was gifted to the debtholders at the expense of the equity by using artificially low evaluations. K-Mart later emerged with a new common stock which skyrocketed. Sears then purchased out K-Mart, resulting in a 250% ROI over two years.

    On the other end of the spectrum is General Growth Properties (GGP) where the debtor actually helped equity with all parties working together. Shares in GGP returned over 1300% after it emerged.

    For WaMu there still are currently a lot of unknowns to evaluating it. The company has up to $17 billion in NOLs it can use to offset future taxes. It also has a number of assets set to go to a liquidation trust with an unknown value. There is probably some value that should remain to shareholders however the debtholders are doing their best to hide that value so they can have it later for themselves just like in K-Mart.

    Moving forward the reinsurance business is booming right now. The new owners of WaMu could inject new capital into the company and make a profit for years tax free in the reinsurance business. WaMu could also purchase other companies, pull them under the WMI shell, and expand its business. I suspect this is what will ultimately happen. WaMu will preform a buy out or merger and assume the target's name since the WaMu name is forever tarnished.

    It's hard to say where the money in this case is going to land. It is a shame you can't own stock in the professionals like Weil, Gotshal & Manges LLP because they are the ones who have profited the most so far. WMI bonds are also going to profit immensely if contract rate is ultimately enforced.

    Here is how I would split a theoretical investment of $10,000 in WaMu if I were just jumping in now.

    WAMU.JG (bond) $8,000
    DIMEQ (warrant) $700
    WAHUQ (bond) $600
    WAMKQ (preferred) $700

    WAMU.JG is your hedge which will pay 106 or 123 cents on the dollar. It trades for around 100 cents on the dollar right now. DIMEQ will either pay 0 cents or 300 cents. If .JG and DIMEQ are paid at 123 and 300 respectively WAHUQ will receive 0 cents. If DIMEQ receives 0 cents then WAHUQ will receive 34 cents on the dollar. If DIMEQ receives 0 cents and .JG receives 106 cents then WAHUQ will receive 99 cents on the dollar. WAMKQ will receive whatever equity can carve out in a settlement. If KQ can receive all the NOLs and use them all at a 35% tax bracket over the next twenty years it could ultimately return 79 cents on the dollar.

    Disclosure: Long WAHUQ and WAMKQ.

    Note: WAMPQ is also WMI preferred stock that is less expensive than WAMKQ. However WAMPQ has a Dec 2012 conversion feature which may be utilized to reduce overall preferred stock liabilities. WAMPQ would be turned into WMI common shares (WAMUQ) at that point. If WAMPQ were converted to common shares WAMKQ may ultimately recover 100 cents on the dollar over the next twenty years. Under that scenario $1.45B in value would remain to WAMPQ and WAMUQ holders.
    Oct 24 12:33 PM | 1 Like Like |Link to Comment
  • Bankruptcy Fine Print Rattles WaMu Debt [View article]
    Mr. Holty,

    DIMEQ has always been a bit ambiguous on finding where its currently at. Somewhere in POR-2 I recall a reserve being established for class 12 and the WAHUQ 32% projection seems to confirm that. If there was not a reserve then the debtors should have stated that WAHUQ stands between 0 and 99%. However the markets suggest a DIMEQ loss (5-1 odds) since its trading at 22%. DIMEQ is a 100 or 0, all or none type situation. Traders are only willing to risk $1 to make $5? The market appears to be giving DIMEQ poor chances at a win.

    Also in the EC's statement yesterday they suggested that DIMEQ was a major factor in the case and the warrant holders should be a part of the mediation because there was millions at stake and that if DIMEQ lost then preferred equity would have a recovery.

    The judge ordered today that everyone but JPM and the FDIC be a part of mediation. She wants a truly "global" settlement that includes all classes from 2 to 22. My estimation is that DIMEQ will take part in that settlement and will get a special partial recovery carved out for them as class 18 (neither class 12 or 22). They have made a good case but there's always the chance they could lose and get moved to class 22 which would mean very little recovery. Highly qualified well overpaid attorneys will determine what percentage recovery properly weighs out the risk vs. the reward, perhaps 50 cents on the dollar?

    The markets however currently predict an Armageddon where DIME gets almost nothing (22% right now), PIERS get nothing (10%), and bond holders receive less than 2% interest. According to the markets about $1 billion dollars has just evaporated. In the end someone is going to make a lot of money on this bankruptcy, the question is who. Traders willing to take a stand could make 500% on their money.
    Oct 6 05:19 PM | Likes Like |Link to Comment