BAC-WT - Bank of America Warrants

[bmichaud]

comments from BTIG analyst:

 

While Justice Bransten yesterday explained that a ruling in favor of summary judgment for one of the parties could be appealed and that a trial likely would not occur until 2013, we believe that those who are focusing on a trial date are overlooking the significant ramifications of a summary judgment ruling against BAC on the issue of successor liability. Even though such a ruling would be subject to appeal, the headlines from the case would blare out to everyone who wants a piece of BAC that the bank had been found to have liability for Countrywide’s debts.

 

Moreover, the investors in 530 mortgage trusts (as well as the attorneys general of New York and Delaware) who are objecting to the $8.5bn settlement with BAC agreed to by Bank of New York Mellon as trustee would be able to point to the ruling when the stand before New York State Supreme Court Justice Barbara Kapnick in May during the Article 77 proceeding. Given that BNY Mellon’s view that the size of the settlement was fair was predicated on its belief that BAC did not have successor liability for Countrywide, the objectors’ case would be given a tremendous boost by a ruling from Bransten against BAC.

 

We cannot fathom how BAC’s reserve for future mortgage putback losses could remain anywhere near its current $16.3bn if that settlement was imperiled. In fact, a proper number likely would be a multiple of that $16.3bn. With that kind of adverse outcome potentially in the not-too-distant future for BAC, any thoughts by bank management that they will be able to drag the proceedings out until a 2013 trial without first sustaining significant damage could fall into the category of “wishful thinking.”

 

Read more: http://www.btigresearch.com/2013/01/10/mbia-legal-trench-warfare-over-assumption-of-liabilities-doctrine-marks-day-2-of-successor-liability-arguments/#ixzz2HcLoHGTO

 

valuecfa,

 

What is your take on Mark's comments? Wishful thinking or sound reasoning? Would the Article 77 ruling really be in all that much jeopardy if BAC continues to stall until a 2013 trial? I just don't see how BAC mgmt would go through with something that would increase its liability by a "multiple" of its current reserves.... Do you?

[racemize]

valuecfa,

 

What is your take on Mark's comments? Wishful thinking or sound reasoning? Would the Article 77 ruling really be in all that much jeopardy if BAC continues to stall until a 2013 trial? I just don't see how BAC mgmt would go through with something that would increase its liability by a "multiple" of its current reserves.... Do you?

 

It's hard to imagine that they would...

[bmichaud]

valuecfa,

 

What is your take on Mark's comments? Wishful thinking or sound reasoning? Would the Article 77 ruling really be in all that much jeopardy if BAC continues to stall until a 2013 trial? I just don't see how BAC mgmt would go through with something that would increase its liability by a "multiple" of its current reserves.... Do you?

 

It's hard to imagine that they would...

 

I know, especially given how skilled Moynihan is - makes me wonder if BAC knows something that MBI bulls don't about successor liability....

[valuecfa]

comments from BTIG analyst:

 

While Justice Bransten yesterday explained that a ruling in favor of summary judgment for one of the parties could be appealed and that a trial likely would not occur until 2013, we believe that those who are focusing on a trial date are overlooking the significant ramifications of a summary judgment ruling against BAC on the issue of successor liability. Even though such a ruling would be subject to appeal, the headlines from the case would blare out to everyone who wants a piece of BAC that the bank had been found to have liability for Countrywide’s debts.

 

Moreover, the investors in 530 mortgage trusts (as well as the attorneys general of New York and Delaware) who are objecting to the $8.5bn settlement with BAC agreed to by Bank of New York Mellon as trustee would be able to point to the ruling when the stand before New York State Supreme Court Justice Barbara Kapnick in May during the Article 77 proceeding. Given that BNY Mellon’s view that the size of the settlement was fair was predicated on its belief that BAC did not have successor liability for Countrywide, the objectors’ case would be given a tremendous boost by a ruling from Bransten against BAC.

 

We cannot fathom how BAC’s reserve for future mortgage putback losses could remain anywhere near its current $16.3bn if that settlement was imperiled. In fact, a proper number likely would be a multiple of that $16.3bn. With that kind of adverse outcome potentially in the not-too-distant future for BAC, any thoughts by bank management that they will be able to drag the proceedings out until a 2013 trial without first sustaining significant damage could fall into the category of “wishful thinking.”

 

Read more: http://www.btigresearch.com/2013/01/10/mbia-legal-trench-warfare-over-assumption-of-liabilities-doctrine-marks-day-2-of-successor-liability-arguments/#ixzz2HcLoHGTO

 

valuecfa,

 

What is your take on Mark's comments? Wishful thinking or sound reasoning? Would the Article 77 ruling really be in all that much jeopardy if BAC continues to stall until a 2013 trial? I just don't see how BAC mgmt would go through with something that would increase its liability by a "multiple" of its current reserves.... Do you?

 

I'd say yes. Absolutely. It would harm BAC's negotiations in other settlements/negotiations, and will give leverage to plaintiffs everywhere that want a piece of the action. For those with a strong case (or that have already made legal progress), it may embolden them (and many other plaintiffs) to go all the way to trial with Countrywide and not negotiate for paltry settlements. At the very least it will give plaintiffs leverage.

 

The "multiples" may be a stretch, unless it goes all the way to trial. If BAC loses the successor liability decision, it may force BAC to increase reserves further (Billions yes, ...multiples of current reserves doubtful in my opinion).

 

I think the risk/reward is in BAC's interest to settle with MBIA, yet there are sharp lawyers in BAC's corner. They must know the ramifications of an affirmation of successor liability.

 

...Yet I own common shares, options, and warrants in both companies.

[ericd1]

No attorney and the source may not be correct (wiki) but it appears BAC may have thought about the possibility of Countrywide bankruptcy. 

 

...This purchase made Bank of America Corporation the leading mortgage originator and servicer in the U.S., controlling 20–25% of the home loan market.[33] The deal was structured to merge Countrywide with the Red Oak Merger Corporation, which Bank of America created as an independent subsidiary. It has been suggested that the deal was structured this way to prevent a potential bankruptcy stemming from large losses in Countrywide hurting the parent organization by keeping Countrywide bankruptcy remote.[34] Countrywide Financial has changed its name to Bank of America Home Loans.

 

http://en.wikipedia.org/wiki/Bank_of_America

 

Is this too simple???

 

 

 

 

 

 

[valuecfa]

No attorney and the source may not be correct (wiki) but it appears BAC may have thought about the possibility of Countrywide bankruptcy. 

 

...This purchase made Bank of America Corporation the leading mortgage originator and servicer in the U.S., controlling 20–25% of the home loan market.[33] The deal was structured to merge Countrywide with the Red Oak Merger Corporation, which Bank of America created as an independent subsidiary. It has been suggested that the deal was structured this way to prevent a potential bankruptcy stemming from large losses in Countrywide hurting the parent organization by keeping Countrywide bankruptcy remote.[34] Countrywide Financial has changed its name to Bank of America Home Loans.

 

http://en.wikipedia.org/wiki/Bank_of_America

 

Is this too simple???

 

Yes, much too simple. BAC has a 51 page slideshow presentation in there motion for summary judgement on successor liability... you can view it here: http://iapps.courts.state.ny.us/webcivil/FCASSearch?param=P

 

Just do a search for the mbia vs countrywide case. It's document number 4030

[ericd1]

Thought so...thanks I will check it out...

[MYDemaray]

comments from BTIG analyst:

 

We cannot fathom how BAC’s reserve for future mortgage putback losses could remain anywhere near its current $16.3bn if that settlement was imperiled. In fact, a proper number likely would be a multiple of that $16.3bn. With that kind of adverse outcome potentially in the not-too-distant future for BAC, any thoughts by bank management that they will be able to drag the proceedings out until a 2013 trial without first sustaining significant damage could fall into the category of “wishful thinking.”

 

I offer a rebuttal to Palmer's assertion from xazp posted June 29 on this board:

 

Because of the 25% bondholder threshold, about 65% of the trusts can't even enter litigation.  In other words, while the $8.5Bn settlement meets or exceeds the "big investor's" expected value for returns via litigation - everyone involved in trusts outside of what they've hit 25%, is basically going to receive zero.  The reason Gibbs & Brun is pushing so hard for the settlement is their investors hold $14Bn of securities in trust where they haven't been able to get the 25% threshold - and those trusts will receive nothing.   

 

And as suggested in my presentation, the alternate path through securities act litigation slammed shut long ago.

[meiroy]

 

That is one of the main points of the successor liability judgement coming down the pipe soon.

 

Even if they put it into Countrywide into bankruptcy (the nuclear option), BAC is still liable for Countrywide if successor liability is proven.

 

Well, this judgement would also mean that in the future there will be another term added to TBTF, it would be TBTBR (To Big To Be Rescued.)  If such a judgement was in place several years ago, would any of these banks and institutions be rescued?

[bmichaud]

By Felice Maranz

    Jan. 10 (Bloomberg) -- Key takeaway yday (1st day of MBIA,

BofA Countrywide successor liability oral arguments) was case

unlikely to be heard this yr, regardless of how motion decided,

MKM’s Harry Fong wrote in note after attending yday’s hearing.

• Judge said trial would not be scheduled until all appeals are done, suggests trial this yr “highly unlikely": Fong

• NOTE: Jan. 7, Fong wrote BAC strategy may be to delay MBI as long as possible

• Early decision would be ‘‘worst outcome’’ for BAC

• Justice Bransten’s initial comments yday morning ‘‘likely well received’’ by BAC sr execs

• Separately, BTIG’s Mark Palmer wrote in blog post Bransten’s ‘‘pointed” questions were day’s “highlight”

 

 

By Felice Maranz

    Jan. 11 (Bloomberg) -- BofA may have ~3 mos. to finalize

$8.5b private label settlement because that’s how long it took

Justice Bransten to decide loss causation post-oral arguments;

timeframe for successor liability may be similar, MKM’s Harry

Fong writes in note.

• BAC needs to settle Article 77 private label case before:

• Settling with MBIA on terms favorable to MBI, and before Bransten rules on successor liability

• Either may jeopardize pennies-on-the-dollar settlement

• NOTE: Yday, Fong wrote (after 1st day of BAC/Countrywide successor liability oral arguments) case unlikely to be heard this yr, regardless of how motion decided

• NOTE: Jan. 7, Fong wrote BAC strategy may be to delay MBI as long as possible

[bmichaud]

comments from BTIG analyst:

 

While Justice Bransten yesterday explained that a ruling in favor of summary judgment for one of the parties could be appealed and that a trial likely would not occur until 2013, we believe that those who are focusing on a trial date are overlooking the significant ramifications of a summary judgment ruling against BAC on the issue of successor liability. Even though such a ruling would be subject to appeal, the headlines from the case would blare out to everyone who wants a piece of BAC that the bank had been found to have liability for Countrywide’s debts.

 

Moreover, the investors in 530 mortgage trusts (as well as the attorneys general of New York and Delaware) who are objecting to the $8.5bn settlement with BAC agreed to by Bank of New York Mellon as trustee would be able to point to the ruling when the stand before New York State Supreme Court Justice Barbara Kapnick in May during the Article 77 proceeding. Given that BNY Mellon’s view that the size of the settlement was fair was predicated on its belief that BAC did not have successor liability for Countrywide, the objectors’ case would be given a tremendous boost by a ruling from Bransten against BAC.

 

We cannot fathom how BAC’s reserve for future mortgage putback losses could remain anywhere near its current $16.3bn if that settlement was imperiled. In fact, a proper number likely would be a multiple of that $16.3bn. With that kind of adverse outcome potentially in the not-too-distant future for BAC, any thoughts by bank management that they will be able to drag the proceedings out until a 2013 trial without first sustaining significant damage could fall into the category of “wishful thinking.”

 

Read more: http://www.btigresearch.com/2013/01/10/mbia-legal-trench-warfare-over-assumption-of-liabilities-doctrine-marks-day-2-of-successor-liability-arguments/#ixzz2HcLoHGTO

 

valuecfa,

 

What is your take on Mark's comments? Wishful thinking or sound reasoning? Would the Article 77 ruling really be in all that much jeopardy if BAC continues to stall until a 2013 trial? I just don't see how BAC mgmt would go through with something that would increase its liability by a "multiple" of its current reserves.... Do you?

 

I'd say yes. Absolutely. It would harm BAC's negotiations in other settlements/negotiations, and will give leverage to plaintiffs everywhere that want a piece of the action. For those with a strong case (or that have already made legal progress), it may embolden them (and many other plaintiffs) to go all the way to trial with Countrywide and not negotiate for paltry settlements. At the very least it will give plaintiffs leverage.

 

The "multiples" may be a stretch, unless it goes all the way to trial. If BAC loses the successor liability decision, it may force BAC to increase reserves further (Billions yes, ...multiples of current reserves doubtful in my opinion).

 

I think the risk/reward is in BAC's interest to settle with MBIA, yet there are sharp lawyers in BAC's corner. They must know the ramifications of an affirmation of successor liability.

 

...Yet I own common shares, options, and warrants in both companies.

 

Thanks for the thoughts! MKM's Jan. 11 comment clarifies a lot, in my mind, why BAC is delaying (pardon the ignorance if everyone else already is at this point)....

 

Bottom line, BAC desperately needs Article 77 approval in order to be able to settle with MBI. If a settlement with MBI indicates the BNY settlement should be much higher, then the Article 77 ruling is screwed. But as MKM points out, BAC may have 3 months to lock-up the BNY settlement before then ultimately settling with MBI for far more than the "pennies on the dollar" BNY plaintiffs received.

 

I almost would argue BAC investors are in a more precarious position - what if Bransten rules on successor liability within three months? What if Article 77 is delayed? Again, assuming the BNY settlement truly relied upon BAC NOT being liable for CW liablities....

 

VERY INTERESTING  8)

[ERICOPOLY]

I almost would argue BAC investors are in a more precarious position - what if Bransten rules on successor liability within three months? What if Article 77 is delayed? Again, assuming the BNY settlement truly relied upon BAC NOT being liable for CW liablities....

 

Depends on what you mean by "more precarious position".  BAC can easily triple the BNY settlement if needed without raising capital.  That would take roughly a dollar of value away (considering on an after-tax basis).

 

[bmichaud]

Depends on what you mean by "more precarious position".

 

I meant from a market sentiment standpoint - Mr. Market would not be happy with even a doubling of the BNY settlement combined with BAC using up the $4B of "possible losses beyond current reserves". But yes, from a permanent impairment standpoint, BAC is fine.

[MYDemaray]

Can someone explain to me why xazp's analysis is incorrect and doesn't apply in this discussion?  That the statute of repose has lapsed on most private security litigation and most pools cannot meet the 25% ownership threshold to do anything about it anyways?

 

Below is xazp's entire post on the matter for reference:

 

I'm the author of the presentation, and I'm glad to see some discussion around it. 

 

To the general question of why didn't I mention 'X,' the reason is I was given 15 minutes to present - it just wasn't enough time to fully discuss a complex topic like BAC. 

 

With respect to a potential rejection of the $8.5Bn settlement, I do not share your view that total costs would go up.  To me, the best document on this topic is the Gibbs & Brun 10/31 filing on behalf of the 'big investors' - the PIMCO/Blackrock/etc group. 

 

This is a quote from their document - these are the would-be plaintiffs.

There are 530 trusts in the settlement... The institutional investors hold 25% of the voting rights in 189 of these trusts.  In all but two of the remaining 341 trusts no group alleges they hold 25% of the voting rights. If the settlement is disapproved these trusts will receive no remedy at all.

 

Because of the 25% bondholder threshold, about 65% of the trusts can't even enter litigation.  In other words, while the $8.5Bn settlement meets or exceeds the "big investor's" expected value for returns via litigation - everyone involved in trusts outside of what they've hit 25%, is basically going to receive zero.  The reason Gibbs & Brun is pushing so hard for the settlement is their investors hold $14Bn of securities in trust where they haven't been able to get the 25% threshold - and those trusts will receive nothing.   

 

And as suggested in my presentation, the alternate path through securities act litigation slammed shut long ago.

[PlanMaestro]

Michael, I have not seen anything that disproves xasp point regarding private litigation. Even more, in the article 77 proceedings the successor liability issue did not play much of a role either.

 

It is also fair to say that government litigation is not and has not been impaired by statute of repose, so the successor liability might play a bigger issue here. But let's be frank, is that to stop the AGs and government from extorting their pound of flesh and headlines? Nevertheless, the amounts being considered are minuscule and BAC is not facing anything different that all the other banks.

 

Also define "desperately needs." This has left the realm of expertise of lawyers becoming more about the decision trees of both sides.

 

MBIA hand is good: too much BAC headline headaches for such a minuscule issue. But I think there has been a bias in most pro-MBIA comments to see all BAC litigation through the prism of the potential benefits to the MBIA litigation and not see the issue from BAC's side. (Oh, not that awful song again .... you think everything is about you, don't you, don't you)

 

At this stage of the game, after BAC has settled $45 billion in litigation and closed most fronts, I don't see how the MBIA vs Countrywide successor liability case is that important. Also, it plays no role in the ability of Countrywide or BAC to pay MBIA the amounts under discussion. It is more of a low probability nuisance card that MBIA thinks it's worth playing considering BAC's other litigation. But this card has lost importance after each settled litigation.

 

And these games are not adding any goodwill to settle this prisoner dilemma once and for all. Consider how minuscule is the MBIA thing for BAC and that it will probably not stop BAC from capital distributions ...

 

Yes, BAC is being an ass too. But Brown better not overplay his hand. At some point, BAC may want to set a precedent against future hostile litigation.

 

Can someone explain to me why xazp's analysis is incorrect and doesn't apply in this discussion?  That the statute of repose has lapsed on most private security litigation and most pools cannot meet the 25% ownership threshold to do anything about it anyways?

[MYDemaray]

Thanks for weighing-in Plan.  Also, just a reminder of this little ruling, that xazp pointed out: http://bucks.blogs.nytimes.com/2011/06/13/supreme-court-ruling-in-janus-case-limits-shareholder-suits/

 

[Kraven]

Thanks for weighing-in Plan.  Also, just a reminder of this little ruling, that xazp pointed out: http://bucks.blogs.nytimes.com/2011/06/13/supreme-court-ruling-in-janus-case-limits-shareholder-suits/

 

The Janus case has nothing to do with BAC.  Completely different fact pattern.

[MYDemaray]

Kraven, please elaborate.  It may not pertain to MBIA, but what about purchasers of the mortgage pools?  Would that not pertain to private securities litigation cases that Mark Palmer is saying will result in multiples of reserves if the $8.5bn settlement is rejected?

[Kraven]

Kraven, please elaborate.  It may not pertain to MBIA, but what about purchasers of the mortgage pools?  Would that not pertain to private securities litigation cases that Mark Palmer is saying will result in multiples of reserves if the $8.5bn settlement is rejected?

 

No, it's all different.  Completely different structures and arrangements.  In terms of funds, people typically speak of a fund by referencing the management company.  But they are different entities.  They aren't in a parent/subsidiary relationship and in fact only have a contractual relationship.  That is, using Janus as an example, they will have funds set up.  These funds are separate and distinct legal entities.  The fund will simply enter into a management agreement with the Janus management entity by which they "hire" Janus to manage their assets and act on their behalf.  This is the same with any fund, hedge fund, whatever. 

 

Now the management agreement may be very restrictive and difficult to disengage with the manager, but in almost all circumstances it is at least technically possible.  Funds are sold (that is, the management agreements are sold) all the time.  So in the Janus case there was just a distinction made between what one entity (the fund) did vs the management company.  The management company may be liable to the fund for certain actions, but anything they did on behalf of the fund is as an agent.

 

The BAC/Countrywide case is completely different.  They are different entities, yes, but the question is did BAC simply buy assets such that they don't step into the shoes of Countrwide or did they effectively buy Countrywide and are responsible for the good and the bad.  BAC is emphasizing the form while MBIA and others are emphasizing the substance (as they define it).  I don't doubt that BAC set up the transaction as best they can and that the words on the page are as they say they are.  The question for the judge will be whether they bought Countrywide (not just the assets) in all but name.

 

So the difference between this and Janus is that Janus related to a contractual matter between 2 unrelated parties.  BAC/Countrywide is different from that as it relates to a parent/sub matter, all in the family, not just contractual relationship.

 

My personal view is that BAC has the losing hand here, but as I've said many times who knows what a court will decide.  I have a hard time seeing how BAC out of the spirit of generosity pays out $45 bil or so that it didn't have to.  They said they have done this when they view it as advantageous to the company and the shareholders.  So why do it if they didn't believe they needed to?  A generous spirit? 

 

No, my view is when they bought Countrywide (assets or otherwise) they intended to get all the "good" that Countrywide was thought to offer.  They expected that the housing crisis would be temporary and then they would roll out a huge mortgage business they rebranded as Bank of America Mortgage or whatever it's called.  I pointed this out in another post a while back.  If they didn't buy the "business" why are Countrywide mortgage holders directed to call a Bank of America phone number?  Why is the business branded as a Bank of America business?  Why can all Countrwide issues for mortgage holders be dealt with at Bank of America branches?  Why do legacy Countrywide employees have Bank of America email addresses?

 

To those that would say that BAC bought the assets and by doing so just is in a position to obtain the "good" and not the bad, I'd point to a different fact pattern.  Say you have a store that provides various warranties on their products.  They decide they don't want to make good on the warranties any more so they talk to the store down the street and decide they will close up shop, sell all assets to that store and therefore walk away from their liabilities.  They close the door one day and open it the next.  Nothing has changed except they sell they are now under someone else's umbrella.  This would be legally impermissible in my view.  It's like the old Steven Wright joke about someone breaking into his house, stealing everything and replacing it with exact replicas. 

[PlanMaestro]

I don't think the successor liability is much of an issue at this stage, but here are both presentations (thanks valueCFA.)

 

BAC: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=vbz/435CZ5JuGV7vGp4jVw==&system=prod

 

MBIA: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=0y6CC5IYShlFFL7pEvE4Ww==&system=prod

 

 

[MYDemaray]

Kraven, thanks for that lengthy reply.  I am less concerned about the topic of successor liability, and more interested in this point Palmer is making:

 

Moreover, the investors in 530 mortgage trusts (as well as the attorneys general of New York and Delaware) who are objecting to the $8.5bn settlement with BAC agreed to by Bank of New York Mellon as trustee would be able to point to the ruling when the stand before New York State Supreme Court Justice Barbara Kapnick in May during the Article 77 proceeding. Given that BNY Mellon’s view that the size of the settlement was fair was predicated on its belief that BAC did not have successor liability for Countrywide, the objectors’ case would be given a tremendous boost by a ruling from Bransten against BAC.

 

We cannot fathom how BAC’s reserve for future mortgage putback losses could remain anywhere near its current $16.3bn if that settlement was imperiled. In fact, a proper number likely would be a multiple of that $16.3bn.

 

My assumption is that MBIA has the upper hand, and that BAC will settle.  That doesn't bother me and it's factored in, in my opinion.  What I am curious about are these bolder, wider claims -- that all of a sudden, due to the Article 77 ruling, the $8.5bn settlement might be imperiled and BAC will somehow have a hole blown in its balance sheet for "a multiple of that $16.3bn". 

 

This argument seems to rest not on the bond insurance side, but on the private security holder side.  To which xazp has pointed out has several lines of defense:

 

1.) statute of repose

2.) contractual provision requiring 25% threshold

3.) the Janus case cited above

 

Does that make sense or am I off base?

[bmichaud]

Also define "desperately needs."

 

If the BNY settlement was locked up and an MBIA settlement was just peanuts to BAC, why is BAC dragging this out? Why does it care about MBIA's consent solicitation? Is Moynihan just brilliantly trying to keep the stock down in order to buy back stock as depressed levels?

 

Perhaps I'm just ignorant in to how the litigation world works....it just doesn't seem logical why BAC would hold out on settling for peanuts if Article 77 did not matter. It's not like they are trying to squeeze a competitor out of business - I just don't see the alternative unless it's simply a battle of egos.

[PlanMaestro]

I just don't see the alternative unless it's simply a battle of egos.

 

Battle of egos have their reasons. In economics is called prisoner's dilemma.

 

http://en.wikipedia.org/wiki/Prisoner's_dilemma

 

For example, see how Moynihan managed a detente with Fannie by praising them in a conference. Fannie got the hint and did a tit-for-tat. Moynihan the great diplomat, who would have thought.

 

Now watch how Brown has been behaving: not getting a hint of tit-for-tats. He thinks he has the nuts, or at least a good hand, and that Moynihan will fold early.  Has not happened, let's see.

[Kraven]

This argument seems to rest not on the bond insurance side, but on the private security holder side.  To which xazp has pointed out has several lines of defense:

 

1.) statute of repose

2.) contractual provision requiring 25% threshold

3.) the Janus case cited above

 

Does that make sense or am I off base?

 

I'll try to respond to these as best I can.

 

1.) statute of repose - I don't know enough about the specific law.  Often there are tolling mechanisms and so forth or questions as to when the clock should start.  In some situations there are public policy reasons against enforcing them too strictly.  I don't  know though what the situation is here.

 

2.) contractual provision requiring 25% threshold - this is trickier.  The 25% threshold that is being cited is in indentures, pooling and servicing agreements, etc as a way to stop nusiance suits by a small security holder that could impact other holders whether by forcing changes or at the very least causing the trust or issuer to incur costs in defense.  So it requires at least 25% of holders (usually determined by principal amount, voting rights, etc.) before an action under or in respect of the agreement (i.e. the indenture or pooling and servicing agreement) can occur.

 

The interesting thing here is that this isn't a suit under the pooling and servicing agreement so much as it's an attempt to force BAC (Countrywide) as seller under an outside agreement (the mortgage loan sale agreement) to buyback loans that were in breach of r&w.  So technically this isn't a suit requiring 25% as it isn't under the pooling and servicing agreement.  I have no idea how far that goes, but it's a good argument to me.

 

3.) the Janus case cited above - discussed in my previous post, but under the successor liability issue.  For this issue, it also is a completely different fact pattern.  BAC is not a "manager" of a fund.  They are the seller of mortgage loans to the trust.  Completely different.

[kevin4u2]

 

My personal view is that BAC has the losing hand here, but as I've said many times who knows what a court will decide.  I have a hard time seeing how BAC out of the spirit of generosity pays out $45 bil or so that it didn't have to.  They said they have done this when they view it as advantageous to the company and the shareholders.  So why do it if they didn't believe they needed to?  A generous spirit? 

 

BAC moved assets from CFC in consideration for $45.3 billion dollars.  CFC had money to payout for it's liabilities.  You make it sound like BAC is making payments on behalf of CFC.  BAC pays the liabilities for BAC.  They are different corporations.  MBIA knows this and are after more money from than CFC can or will payout. 

 

 

No, my view is when they bought Countrywide (assets or otherwise) they intended to get all the "good" that Countrywide was thought to offer.  They expected that the housing crisis would be temporary and then they would roll out a huge mortgage business they rebranded as Bank of America Mortgage or whatever it's called.  I pointed this out in another post a while back.  If they didn't buy the "business" why are Countrywide mortgage holders directed to call a Bank of America phone number?  Why is the business branded as a Bank of America business?  Why can all Countrwide issues for mortgage holders be dealt with at Bank of America branches?  Why do legacy Countrywide employees have Bank of America email addresses?

 

I want to address the questions you raise.  A number of businesses have different subs and the same phone number.  A judge doesn't care if they use the same phone.  Secondly, you can name your business anything you like after you purchase it.  By calling CFC a "Bank of America" business does not cause them to merge.  Third, yes you can do business at any bank branch with various subs that a company owns.  Go to any bank branch and buy insurance or get a credit card and you are dealing with a different sub than the parent.  Lastly, a judge could care less about what email addresses people use, that does not prove successor liabilities by a country mile. 

 

Do you honestly think those are agruments are going to be used in court?