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Troy Racki

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  • WaMu Seesaws On M&A Speculation [View article]
    Thanks for all of your hard work Joyce in getting the equity committee formed. If it was not for your efforts equity may have gotten nothing at all out of the reorganization.
    Mar 24 08:19 PM | 7 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    Actually this isn't really a bank stock. It's a NOL stock. It's a pure value play on the book value of WMIH's NOL. As long as its trading below $3/share, you are buying cash for less than 100 cents on the dollar. Once WMIH's NOL has been fully harvested then its a matter of what is the company's value moving forward and what line of business are they in. My analysis may totally change then but for now, as long as "cash" is on "sale" it seems like a no brainer to me.
    Dec 17 02:22 AM | 6 Likes Like |Link to Comment
  • WaMu: JP Morgan Keeps Turning Lead Into Gold [View article]
    If JP Morgan is encountering severe losses from WaMu's subprime woes then why aren't they broadcasting them? They went as far as to write up their loan portfolio as early as May 2009 which indicates that they do not expect many losses.

    JP Morgan will take a loss on something. However they have no actual cost involved. For example the HELOC backed securities are only worth 60% of par. Given the bank received the HELOCs for free what do they have to lose? It is not like they paid 80% of par for them.

    JP Morgan paid so little, in fact they paid a negative purchase price that the WaMu side of things would have to lose at least $55.4 billion before JP Morgan might actually incur a real financial loss. JP Morgan's stress test stated that "worst case" the bank would lose $40 billion on all its loans, between both WaMu's and JP Morgan's. The worst case has not happened. Meanwhile much of the $55.4 billion comes out of the pockets of Washington Mutual bank bondholders. Currently the junior debt trades at 1 cent on the dollar indicating that the markets expect the FDIC will do little to help the creditors recover their losses. The FDIC is the responsible party to the bank creditors as receiver of the bank. Why isn't the FDIC asking JP Morgan for more to benefit the creditors?

    If you consider the Wachovia and IndyMac deals brokered by the FDIC one can quickly surmise that the FDIC has little concern for achieving actual market value concerning assets seized. A federal judge forced the FDIC to go with Well Fargo's better offer. Shareholders immediately received 700% more from that deal. The taxpayers benefitted immensely by not being left on the hook for billions in concessions. In the case of IndyMac, the bank was sold for $13.9 billion but had only one tenth the assets ($32B) of WaMu. Given that valuation WaMu should have sold for $140 billion, not $1.9 billion, and eventually ($3.4) billion.

    Maybe $140 billion for WaMu is overpriced, but a negative amount? Even a dentist can figure this dumb deal out.

    (Revised for gammar and $55.4B not $57.1B as previously written.)
    Mar 28 03:12 PM | 6 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    To each their own. For every buyer there is a seller. Good luck with your short.
    Dec 18 02:21 AM | 5 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    If you assign $0 value, then by all means short this to oblivion.
    Meanwhile KKR, a $7.2B company, is putting up $95M in preferred and warrants. In a "ZERO" company?

    I'm going to side with KKR on this one.
    Dec 17 09:57 PM | 5 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    Mr. Melt,

    Individuals whom purchased WAMPQ, WAMKQ, or WAMUQ shares prior to the February 9, 2012, "ex-date" (see SA article) and signed the releases received two kinds of shares in return. WMIH and "escrow" shares. WMIH shares were immediately tradable and is the new company going forward (and focus of the above article). "Escrow" shares are not tradable, nor ever will be, and carry market values of N/A in accounts. Seeking Alpha only publishes actionable news and since "escrow" shares are frozen and non-actionable, reporting on them makes minimal sense. "Escrow" shares are merely placeholders to determine how much one should receive if there are any remaining estate monies once all creditors have been paid off. "LTI" refers to Liquidating Trust Interests. The WaMu liquidating trust is a pot of money that has been established to pay off claims. Currently everyone has been paid off except for class 12 employee claims, Class 16 WAHUQ claims, and Class 18 claims. Right now the best estimates are that all Class 16 claims will be paid in full sans $2M. Should class 12 claims be further reduced than what has been projected already, then there will be money available to reach class 18. Class 18 has an unknown amount due to it, but is at least $27M. Consequently the liquidating trust will have to find another $29M before common and preferred shareholders will receive anything at a 25/75 split.

    A number of heated messages have been reaching my inbox regarding "escrow" shares. It appears that some retail shareholders sold all their WMIH shares not fully understanding that made up the vast majority of their recovery and are expecting to receive monies from their "escrow" shares instead. Unfortunately these shareholders have been mislead by online message boards that spread rampant misinformation to either pump or dump share prices and are unlikely to recover the monies they lost from pre-seizure WaMu shares unless they buy and hold WMIH shares until they reach their true value (which is detailed above). I extend my deepest sympathies to those whom have been seriously and willfully mislead by others for financial gain.

    Hopefully this answers your questions, if not feel free to ask additional ones below.

    Troy Racki
    Dec 15 09:42 PM | 5 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    1. Yes, the warrants do not exist yet. Nothing exists yet. The deal could fall through tomorrow. This entire article assumes the deal will go through. KKR will immediately bank a lot of profits on their warrants if it does go through. I can't see them turning back now at this point. Do you?

    2. KKR is planning to put up $95M for 26% of the company. If share prices continue to rise as they do, if a 3rd party is going to be brought in, they are going to be paying more than what KKR does. The whole $1B for 42% is ambiguous like I said but I ran the numbers for it regardless to see what share value it produced. There's no assurance it will get that valuation so that's why I included a more grounded $2.99/share figures.
    Dec 18 11:45 PM | 4 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    Your buying criteria states NOLs at zero value. WMIH is a NOL and nothing more. So there appears to be no reason to buy WMIH based on your buying criteria.
    Dec 18 11:04 AM | 4 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    Hi Melt,

    I saw the news on USA Today and as soon as I saw it I went, "woah" to myself. The news is available on most major junkets including ABC News and the WSJ. Absorbing the financial arm means that it now does business as a financial co. just like WMIH is a financial co. Similar businesses means they can merge without IRS NOL rules being triggered. KKR might just take the whole of WMIH for NOL usage. With MLPs, taxes are done differently. MLPs typically happen with energy companies which pass both the profits and the tax burden onto its shareholders. I have shares in Kinder Morgan and receive K1s and have to pay taxes on the profits. If KKR takes on WMIH's NOLs it just means that its shareholders would affected as if they were the company. They would show an ordinary business loss which would cancel ordinary business income, meaning they would not have to pay taxes on that income, saving them X cents on the dollar where X is equal to their individual tax rate. Since tax rates vary from shareholder to shareholder, NOLs are of more value to corps with a high effective tax rate than those with a different tax structure like a MLP.

    Dec 16 10:40 PM | 4 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    WMIH, when it concludes its first merger, will likely acquire the other company's name, symbol, and exchange. For example, SBC took over AT&T but kept the AT&T name and symbol. I doubt WMIH wants to keep a name that is tied to FDIC seizure. With the recent KKR Financial buy out by KKR, I wonder if WMIH is going to be vacuumed up completely by KKR, just not 26%.

    Time will tell.
    Dec 23 06:23 PM | 3 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    If the NOLs are valued at $1.10/share, why would KKR pay full value for them? They would pay less than $1.10. So they must value them more than $1.10. Their warrants are a $1.38/share (blended) strike price. That indicates again, more value to the NOLs than $1.38 because who would want a strike at company's full value? I don't see KKR getting involved if they can't at least double their money. So far they almost have.
    Dec 18 11:48 PM | 3 Likes Like |Link to Comment
  • Dissecting The Washington Mutual KKR Deal [View article]
    Such as?
    Dec 18 11:01 AM | 3 Likes Like |Link to Comment
  • How WaMu Failed [View article]
    "The big question, though, is whether the FDIC gave a nod and a wink..."

    You really have to wonder. Many months ago I wrote several articles on Seeking Alpha that pointed out the irrational actions of the FDIC towards the end of September and into October. For example in the Wachovia deal the FDIC tried to gift the bank to Citibank for $2 billion and then tried to block Wells Fargo when it offered seven times the amount plus no insurances. Had Citi gotten their deal the taxpayer would have been on the hook for potential huge losses by all the guarantees Citi would have received.

    The FDIC stated they were afraid to take a loss on WaMu that they toasted the bondholders. Consequently about $30 billion of bonds went up in flames. Curiously enough JP Morgan took a $30 billion write down in their portfolio as negative goodwill. When do you ever see negative goodwill in a business deal. Six months later JP Morgan reports they stand to make $26 billion on the WaMu loan portfolio.

    Since the beginning of 2008, 149 banks have failed. Of all of those the FDIC has taken a loss, save one, WaMu. Look at the data the Wall Street Journal provides.

    Quoted recently in the Wall Street Journal, Hans Brost, a Washington Mutual shareholder who was nixed stated. "There is a lot of smoke. Somewhere there has got to be a fire."

    Curiously enough the $1.9 billion purchase price came with $4 billion in cash, money raised by the holding company through security sales and kept as a deposit at WaMu bank for tax and dividend payments. JP Morgan for the last year has stated in court that the deposits do not exist, until the FDIC stepped in and said that the deposits do and that regardless of the chapter eleven proceedings that they will retroactively seize the deposits if the judge rules that they belong to the holding company.

    JP Morgan's $1.9 billion purchase price also included another $3 billion in tax refunds and $4 billion in trust preferred securities. I've taken the time to read the trust securities prospectus and its clearly stated that they will go to WaMu's holding company in case of the bank's failure. Mr. Dimon doesn't agree.

    Meanwhile the FDIC is on a tear looking for new powers to seize holding companies because it seems that their WaMu bumble has become a thorn in their side. If they receive this power they can take charge and seize anyone from American Express to Sears Corporation if they want, insolvent or not. Even the OTS reports that up to time of seizure that WaMu was solvent. Currently the FDIC doesn't need to ever provide evidence that their judgment is sound. Instead they may shut down any financial they see fit without having to answer to anyone.

    Given that all these bankers are colleagues and possibly friends, you wonder if there is some back scratching going on. Jamie Dimon is New York Fed Chairman and chairman of JP Morgan. Was the FDIC completely unbiased in the sale price of WaMu to JP Morgan? The FDIC seems awfully friendly towards JP Morgan, filing in Delaware bankruptcy court that if JP Morgan does not receive the $4 billion that they will step in an seize it.

    AmTrust has taken a page from the WaMu fiasco and is moving all their money early to protect themselves from the FDIC. Can you blame them? As long as the FDIC keeps changing the rules, private business will have to adapt.

    Fortunately others like yourself are catching on and are questioning the smoke and mirrors. Hopefully the FDIC does not receive any more power as their current actions cast reasonable doubt.
    Dec 3 11:32 PM | 3 Likes Like |Link to Comment
  • UAW: It Should Be Giving Up More [View article]
    Valid arguements have been made by comments above. Feel free to consider the following.

    "It is not uncommon for medical school graduates to work 80 to 100 hours a week, with surgical residents typically logging over 110 hours a week. Medical residencies traditionally require lengthy hours of their trainees. Classically, 36-hour shifts are separated by 12 hours of rest, during 100+ hour weeks. The American public, and the medical education establishment, is increasingly recognizing that such long hours are counter-productive, since sleep deprivation increases rates of medical errors."


    The average 1st year resident salary is: $46,000.

    Occupational hazards include: "Infections due to the exposure to blood, body fluids or tissue specimens possibly leading to blood-borne diseases such as HIV, Hepatitis B and Hepatitis C."

    HIV, Hepatitis B and Hepatitis C are all lethal. Hepatitis B is the only of these three with a vaccine.


    "Laid-off blue-collar workers would still get most of their pay because their United Auto Workers union contract requires the company to make up much of the difference between state unemployment benefits and their wages.

    GM also will pay salaried workers 75 percent of their pay if they are furloughed under a new company policy. In the past, white-collar workers reported for duty even if their plants were closed, spokesman Tom Wilkinson said."

    I do not agree with Mr. Nardelli's compensation. He is now CEO at Chrysler where full compensation details are being withheld. However:

    "According to the report, Home Depot's board has awarded him $245 million in his five years at the helm."
    May 10 02:19 PM | 3 Likes Like |Link to Comment
  • 4 Stocks That Should Outperform The Market [View article]
    Nice to see someone else covering WMIH after being the only writer for years. I wonder what KKR has in store for WMIH in 2014?
    Dec 30 10:17 PM | 2 Likes Like |Link to Comment