UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  July 30, 2012
 
WMI LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
 
Commission File Number:  1-14667
 
WASHINGTON
45-6794330
(State or other jurisdiction of
(IRS Employer
incorporation)
Identification No.)
 
1201 THIRD AVENUE, SUITE 3000
SEATTLE, WASHINGTON 98101
(Address of principal executive offices, including zip code)
 
(206) 432-8887
(Registrant’s telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
 
 

Item 8.01
Other Events

As previously disclosed in the Current Report on Form 8-K that was filed by Washington Mutual, Inc. (“ WMI ”) on March 12, 2012, WMI Liquidating Trust (the “ Trust ”) was formed on March 6, 2012, when WMI and WMI’s wholly-owned subsidiary, WMI Investment Corp. (“ Investment ” and collectively with WMI, the “ Debtors ”), entered into a liquidating trust agreement with William C. Kosturos as the liquidating trustee, and CSC Trust Company of Delaware as the Delaware resident trustee (the “ Agreement ”).
 
On July 30, 2012, the Trust, as successor-in-interest to the Debtors, filed the Trust’s Quarterly Summary Report for the period April 1, 2012 to June 30, 2012 (the “ Quarterly Summary Report ”) with the United States Bankruptcy Court for the District of Delaware (the “ Court ”) (Case Number 08-12229 (MFW)).  The Quarterly Summary Report is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
 
The Quarterly Summary Report will be made available electronically on the internet website of the Trust at wmitrust.com.
 
Cautionary Statement Regarding Financial and Operating Data
 
The financial and operating data set forth in the Quarterly Summary Report 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). The 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. The Quarterly Summary Report was prepared in accordance with liquidation basis accounting but was not audited or reviewed by an independent accountant, and is subject to future adjustment and reconciliation. Given its limited scope, the Quarterly Summary Report does not include all adjustments and notes that would be required to report in accordance with Generally Accepted Accounting Principles. Results set forth in the Quarterly Summary Report should not be viewed as indicative of future results.
 
Cautionary Statement Regarding Forward-Looking Statements
 
The exhibit hereto may contain certain estimates, statements of belief and assumptions that may be deemed to be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and/or covered by the “Bespeaks Caution” doctrine applied by the courts under the antifraud provisions of the federal securities laws. Such forward-looking statements are based on current plans, expectations, estimates and beliefs about the value of the assets of the Trust. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future payments to holders of beneficial interests in the Trust (“ Liquidating Trust Interests ”) and are subject to risks and uncertainties that are difficult to predict. These risks include, among other factors: (i) the Trust’s ability to obtain Court approval with respect to motions in the Debtors’ chapter 11 proceedings prosecuted by the Trust from time to time; (ii) the Trust’s ability to resolve disputed claims; (iii) risks associated with any litigation and other claims that might be brought against the Debtors or by or against the Trust in the future during the anticipated initial three year term of the Trust (which term may be extended for up to three more years or a maximum of six years, subject to certain limited exceptions, with the approval of the Court); and (iv) there is no liquidity for the Liquidating Trust Interests issued by the Trust, which are non-certificated and non-transferable other than by will, intestate succession or operation of law.

Item 9.01
Financial Statements and Exhibits.

(d) Exhibits
 
Exhibit No.
  
Description
 
EX-99.1
 
Quarterly Summary Report for the period April 1, 2012 to June 30, 2012, filed with the United States Bankruptcy Court for the District of Delaware by the WMI Liquidating Trust as Successor-in-Interest of Washington Mutual, Inc. and WMI Investment Corp.
 
 

 
 

 

 
2
 


 

 
Signature(s)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
WMI LIQUIDATING TRUST
 
       
Date: July 30 2012                 
By:
/s/  John Maciel  
   
John Maciel
 
   
Chief Financial Officer,
WMI Liquidating Trust on behalf of Washington Mutual, Inc. and
WMI Investment Corp.
 
       



 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

3
 
 
 
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):
April 1, 2012 through June 30, 2012

Beginning Cash Balance:
$ 939,726,444
     
All receipts received by WMI Liquidating Trust (“Trust”) on behalf of the Debtors:
     
Cash Sales / Interest:
$ 100,796
     
Collection of Accounts Receivable:
$ 0
     
Proceeds from Litigation / Settlement:
$ 0
     
Sale of Debtor’s Assets:
$ 587,439
     
Other Cash Receipts /Transfers:
$ 2,294,640
     
Total of cash received:
$ 2,982,875
     
Total of cash available:
$ 942,709,319
     
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:
$ 417,289,168
     
Disbursements made pursuant to the administrative claims of bankruptcy professionals:
$ 31,474,169
     
All other disbursements made in the ordinary course:
$ 1,568,191
     
Total Disbursements
$ 450,331,528
     
Ending Cash Balance:
$ 492,377,791

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.

  July 30, 2012   John Maciel, Chief Financial Officer, WMI Liquidating Trust on behalf of Washington Mutual, Inc. and WMI Investment Corp.     /s/   John Maciel
Date
 
Name/Title
   
 
 
 
 
 
 
 
  WMI Liquidating Trust
  June 2012 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 -- June 30, 2012
     
13
 
Next Dollar Analysis -- Projected after August 1, 2012 Distribution
     
14
 
Rollforward of Disputed Claims Reserve
 
 
 

 
 
 
 
BACKGROUND / DISCLAIMER
 

This Quarterly Summary Report of the 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 April 1, 2012 through June 30, 2012, 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 were not audited or reviewed by an independent registered public accounting firm and are 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 as of 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 the initial distribution pursuant to the Plan (the “Initial Distribution”).  WMI emerged on the Effective Date as a newly reorganized company, WMI Holdings Corp. (“Reorganized WMI”).

In addition, the Plan provided for the creation of the Trust, which was formed on March 6, 2012, pursuant to the execution of the liquidating trust agreement dated as of March 6, 2012, by and among the Debtors, William C. Kosturos, as the liquidating trustee (the “Liquidating Trustee”), and CSC Trust Company of Delaware, as the Delaware resident trustee (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 has an initial term of three years from the Effective Date, subject to extension for up to an additional three years (subject to certain limited exceptions) with the approval of the Bankruptcy Court.

As the successor-in-interest to WMI, the Trust bears the responsibility for future 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.   Management used the services of an independent valuation firm to make its estimates for select assets. 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 the 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 to be filed with the SEC for its fiscal year ending December 31, 2012.
 
 
 
 
1
 
 
 

 
The information provided in the notes to the financial statements are 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 a link to the Trust’s filings with the SEC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
2
 
 
 

WMI Liquidating Trust
June 2012 Quarterly Summary Report - UNAUDITED
Schedule of Cash Receipts and Disbursements -- Quarterly
 

   
For the Quarter ended June 30, 2012
 
                               
   
Cash
   
Litigation
Reserve
   
Disputed Claim
Cash
   
Restricted Cash
   
Total
 
Beginning Cash - March 31, 2012
  $ 139,722,538     $ 20,000,000     $ 722,620,608     $ 57,383,298     $ 939,726,444  
                                         
Receipts
                                       
Interest /Investment Income Received
                    3               3  
Treasury Bill accretion
    -       -       100,793       -       100,793  
Sale / Monetization of Debtor's assets
    587,439       -       -       -       587,439  
Collection of tax receivable
    -       -       -       -       -  
Proceeds from Litigation
    -       -       -       -       -  
Proceeds from run-off notes
    -       -       -       -       -  
Reimbursement for tax professional fees
    1,146,318       -       -       -       1,146,318  
Other receipts
    699,765       -       11,129       437,428       1,148,322  
        Total Receipts
    2,433,522       -       111,926       437,428       2,982,875  
                                         
Transfers
                                       
Disallowance of disputed claims
    479,181,658       -       (479,181,658 )     -       -  
Allowance of disputed claims
    -               (17,645,643 )     17,645,643       -  
Distribution to disputed Liquidating Trust Interests
    (42,736,419 )     -       42,736,419       -       -  
Other transfers
    196,666       -       -       (196,666 )     -  
        Total transfers
    436,641,905       -       (454,090,882 )     17,448,977       -  
                                         
Disbursements/Payments
                                       
                                         
Disbursements to allowed claimants
                                       
Disbursements to Liquidating Trust Interests
    414,858,364       -       -       (3,167,899 )     411,690,465  
Disbursements to newly released claims
    -       -       -       3,460,847       3,460,847  
Other disbursements to allowed claimants (taxes, releases, etc)
    2,354       -       -       2,135,502       2,137,856  
                                         
Disbursements made for bankruptcy expenses
                                 
 For services prior to the effective date
    27,807,776       -       -       -       27,807,776  
 For services after the effective date
    2,925,025       741,368       -       -       3,666,393  
                                         
Disbursements in ordinary course:
                                       
 Salaries and benefits
    383,813       -       -       -       383,813  
 Travel and other expenses
    22,774       -       -       -       22,774  
 Occupancy and supplies
    160,144       -       -       -       160,144  
 Other outside services
    385,839       -       -       -       385,839  
 Other disbursements
    68,048       -       -       -       68,048  
 D&O Insurance
    464,625       -       -       -       464,625  
Trust Advisory Board fees and expenses
    82,949       -       -       -       82,949  
 Disbursements in ordinary course
    1,568,191       -       -       -       1,568,191  
                                         
Total Disbursements
    447,161,709       741,368       -       2,428,451       450,331,528  
                                         
                                         
Ending Cash and Cash Equivalants
  $ 131,636,255     $ 19,258,632     $ 268,641,652     $ 72,841,252     $ 492,377,791  
 
 

 
3
 

WMI Liquidating Trust
June 2012 Quarterly Summary Report - UNAUDITED
Schedule of Cash Receipts and Disbursements -- Cumulative
 
 
 
   
From the Effective Date through June 30, 2012
 
   
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
                    3               3  
Treasury Bill accretion
    -       -       119,064       -       119,064  
Sale / Monetization of Debtor's assets
    587,439       -       -       -       587,439  
Collection of tax receivable
    -       -       -       -       -  
Proceeds from Litigation
    -       -       -       -       -  
Proceeds from run-off notes
    -       -       -       -       -  
Reimbursement for tax professional fees
    1,146,318       -       -       -       1,146,318  
Other receipts
    740,591       -       11,129       904,564       1,656,284  
        Total Receipts
    2,474,348       -       130,197       904,564       3,509,108  
                                         
Transfers
                                       
Disallowance of disputed claims
    479,181,658       -       (479,181,658 )     -       -  
Allowance of disputed claims
    -       -       (20,822,948 )     20,822,948       -  
Distribution to disputed Liquidating Trust Interests
    (42,736,419 )     -       42,736,419       -       -  
Other transfers
    196,666       -       -       (196,666 )     -  
        Total transfers
    436,641,905       -       (457,268,187 )     20,626,282       -  
                                         
Disbursements/Payments
                                       
                                         
Disbursements to allowed claimants
                                       
Disbursements to Liquidating Trust Interests
    414,858,364       -       -       (3,167,899 )     411,690,465  
Disbursements to newly released claims
    -       -       -       3,460,847       3,460,847  
Other disbursements to allowed claimants (taxes, releases, etc)
    2,354       -       -       2,135,502       2,137,856  
                                         
Disbursements made for bankruptcy expenses
                                 
   For services prior to the effective date
    28,150,823       -       -       -       28,150,823  
For services after the effective date
    2,925,025       741,368       -       -       3,666,393  
                                         
Disbursements in ordinary course:
                                       
Salaries and benefits
    421,877       -       -       -       421,877  
Travel and other expenses
    22,774       -       -       -       22,774  
Occupancy and supplies
    201,691       -       -       -       201,691  
Other outside services
    399,189       -       -       -       399,189  
Other disbursements
    68,048       -       -       -       68,048  
D&O Insurance
    464,625       -       -       -       464,625  
   Trust Advisory Board fees and expenses
    82,949       -       -       -       82,949  
Disbursements in ordinary course
    1,661,152       -       -       -       1,661,152  
                                         
Total Disbursements
    447,597,717       741,368       -       2,428,451       450,767,536  
                                         
                                         
Ending Cash and Cash Equivalants
  $ 131,636,255     $ 19,258,632     $ 268,641,652     $ 72,841,252     $ 492,377,791  
 

 
4
 

WMI Liquidating Trust
June 2012 Quarterly Summary Report - UNAUDITED
Statements of Net Assets in Liquidation
(Liquidation Basis)
 

 
   
6/30/2012
   
Effective Date
   
Assets:
             
Cash and cash equivalents
  $ 131,636,255     $ 140,117,720    
Cash held in reserve for litigation costs
    19,258,632       20,000,000    
Cash held in reserve for disputed claims
    268,641,652       725,779,642    
Other restricted cash
    72,841,250       53,738,857    
Total cash and cash equivalents
    492,377,790       939,636,219    
                   
Income tax receivable
    96,000,000       96,000,000    
WMI runoff notes
    133,836,280       127,851,091    
WMI runoff notes (held in Disputed Claims)
    38,500       1,232,742    
Investment in subsidiaries
    3,670,320       3,715,263    
Prepaid expenses
    1,376,262       948,080    
Other assets
    1,714,498       2,285,732    
     Total assets
  $ 729,013,650     $ 1,171,669,128    
                   
Liabilities:
                 
Pre-effective date liabilities
  $ 447,053     $ 94,112,477    
Cash held for allowed claimants
    72,406,864       53,471,976    
Estimated costs to operate trust
    29,367,009       40,000,000    
Accounts payable
    21,361,774       6,123,945    
Accrued wages and benefits
    176,603       18,261    
Other accrued liabilities
    7,942,780       133,441    
Accrued liabilities - DCR
    11,503       -    
Other post-petition liabilities
    -       -    
   Total liabilities
    131,713,586       193,860,100    
                   
Net assets in liquidation:
                 
Net assets subject to disputed claims
    268,668,649       727,012,384    
Net assets available to Liquidating Trust Interests
    328,631,415       250,796,644    
     Total net assets
    597,300,064       977,809,028    
                   
     Total liabilities and net assets
  $ 729,013,650     $ 1,171,669,128    

NOTE: A cash distribution of $73.8 million is expected to be paid to LTI holders on or about
August 1, 2012.


 
5
 

WMI Liquidating Trust
June 2012 Quarterly Summary Report - UNAUDITED
Statement of Changes in Net Assets in Liquidation
(Liquidation Basis)
 

     
Quarter to Date
   
Cumulative to Date
   
                 
 
Net assets, beginning:
    975,197,770       977,809,027    
                     
 
Income
                 
 
     Interest / Investment income - DCR
    98,148       116,419    
 
     Interest income - runoff notes
    4,241,583       4,790,946    
 
     Earnings / (Losses) from subsidiaries
    (42,173 )     (44,942 )  
 
     Recovery of pre-effective expense
    51,305,697       51,305,697    
 
     Other income
    384,343       385,526    
 
     Total income
    55,987,598       56,553,646    
                     
 
Expenses
                 
 
     Payroll and benefits
    400,415       485,975    
 
     Occupancy and supplies
    101,622       117,361    
 
     Professional fees & services
    7,891,066       9,834,527    
 
     Other expenses
    112,688       195,129    
                     
 
     Total operating expenses
    8,505,790       10,632,991    
 
     Change in reserve for costs to operate trust
    (8,332,929 )     (10,632,991 )  
 
     Litigation expenses
    1,206,082       1,378,942    
 
                 Added / (Reduced) Expense
    1,378,942       1,378,943    
                     
 
Other items
                 
 
     Allowed Claims
    (17,645,643 )     (20,822,948 )  
 
     Disbursements to Liquidating Trust Interests
    (414,858,364 )     (414,858,364 )  
 
     Other disbursements
    (2,354 )     (2,354 )  
                     
 
Total changes in Net Assets
    (377,897,706 )     (380,508,963 )  
                     
 
Net assets, ending
  $ 597,300,064     $ 597,300,064    
 
 




 
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 liquidating trust, the WMI Liquidating 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 in 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 June 30, 2012 is reported on the “Rollforward of Liquidating Trust Interests”.

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 future 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 Equity Interest holders who 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 (or holders who have not provided the necessary tax forms) did not receive cash or LTIs as part of the Initial Distribution, and such assets were transferred to the DCR pending resolution of claims (or submission of the necessary tax forms).   Since the Effective Date, the DCR balances have changed due to the disallowance and 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 AICPA Statement of Position 93-3 (“SOP 93-3”).  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 SOP 93-3 include:

·  
Assets and liabilities should be reported at their net realizable values.  The Trust is reporting the values consistent with the values used for tax purposes, which were based on estimates made by an independent valuation firm for select assets.

·  
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 costs expected to execute the liquidation should be recorded upfront.  The Trust recorded a liability for the $40.0 million on the Effective Date provided by the Plan to operate the Trust.  As of June 30, 2012, the remaining liability is $29.4 million.

 
 
 
7
 
 

 
Note 3:  Distributions to LTI Holders


The Plan provides direction that the Liquidating Trustee will make distributions on at least a quarterly basis if the distributable cash available is greater than $25 million.   However, on May 22, 2012, the Trust announced that it would pay a one-time special interim distribution of $458 million as of May 30, 2012.  The distribution was paid on June 8, 2012.

The interim distribution was possible primarily as a result of favorable decisions permitting the release of a $406 million claim reserve that had been established in conjunction with a proof of claim filed by the Policeman’s Annuity and Benefit Fund of the City of Chicago, the Boilermakers National Annuity Trust and Doral Bank Puerto Rico in the Bankruptcy Court.  The Bankruptcy Court had also sustained claim objections in favor of WMI’s estate in relation to claims filed by other claimants such as certain former employees of WMB resulting in a release of approximately $52 million, thereby bringing the total amount of the Distribution to $458 million.

The distribution for the quarter ending June 30, 2012 will be paid on August 1, 2012.  On August 1, 2012, the Trust is scheduled to distribute $73.8 million.  The primary source for the August distribution is disallowance of claims of approximately $21.6 million (and the concomitant release of funds with respect thereto), the reduction of the release for potential indemnification claims, and the release of approximately $51.4 million in reserves for contingent Pre-Effective Date liabilities that no longer exist.


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, and to the extent elected by such holder, Runoff Notes issued by Reorganized WMI, and any dividends, gains or income attributable in respect of any of the foregoing.   The amounts retained are calculated as if each of the claims is 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 such 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.

During the quarter ending June 30, 2012, $479.2 million of cash and $1.2 million of Run-off Notes were released from the DCR in respect of disallowed claims.  Cash of $457.6 million was distributed on June 8, 2012 and $21.6 million will be distributed as part of the August 1, 2012 distribution (see Note 3, above).  Furthermore, assets relating to LTIs with a face value of $67.8 million previously allocated to the DCR were effectively redistributed due to the disallowance of claims.

Of the $457.6 million of cash distributed to LTI holders on June 8, 2012, $42.7 million was retained by the DCR in respect of LTIs allocable to the DCR for the benefit of disputed claimants.

During the quarter ending June 30, 2012, $17.6 million of cash held by the DCR on behalf of disputed claimants was released due to their claims becoming allowed by the Court or due to such claimants providing their necessary tax
 
 
 
 
8
 
 
 
 
information.  Of the $17.6 million, $17.3 million is held in Restricted Cash due to such claimants to be distributed on August 1, 2012.
 
Furthermore, the DCR released approximately $21.6 million of cash to the Trust on June 30, 2012 to be distributed as part of the August 1 distribution.

After giving effect to the transactions described above, on the Statement of Net Assets, as of June 30, 2012, DCR assets include cash of $268.6 million and $38,500 of Runoff Notes (including interest).  The DCR, by reason of its allocable ownership of LTI assets on behalf of disputed claimants, is entitled to a prorata 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”.

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 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 the Disputed Equity Escrow (other than taxes) are borne by the Trust.  As of June 30, 2012, there were approximately 5.3 million shares of Reorganized WMI common stock in the Disputed Equity Escrow.  The scheduled August 1, 2012 distribution will include a distribution of approximately one million shares of Reorganized WMI to Class 22 claimants pursuant to the Plan.  The shares available for distribution are available as a result of a release of equity reserves held on account of recently disallowed equity claims.


Note 5:  Reserve for Litigation Costs

The Plan requires that the Trust set aside $20 million to potentially pursue recoveries from pending and future litigations and to defend certain claims.  Because it has not been determined whether and to what extent such funds will actually be used, the Trust did not, upon emergence, record a liability for such costs and the Trust will report costs as incurred.  However, the Trust does report the cash as a separate line item on the Statement of Net Assets and the activity is disclosed on the Schedule of Cash Receipts and Disbursements.  As of June 30, 2012, $741,368 had been paid to litigation professionals and total costs incurred were $1,378,942.


Note 6:  Taxes

Pursuant to the Plan and the Global Settlement Agreement with JPMC and the FDIC, the Trust and JPMC will share in all future WMI net tax refunds on a 20% / 80% prorata basis, respectively.  There are numerous litigations and refunds remaining at the Federal and State tax levels.  Total net refunds remaining are estimated to be between $200 and $600 million, of which the Trust would receive between $40 and $120 million.  An escrow account was established to accumulate net tax refunds in accordance with the terms of the Global Settlement Agreement.  Management’s current estimate of the Trust’s share of the net tax refunds is $96 million.  There was no significant activity in the tax refund escrow account and there are no scheduled distributions from the account.


Note 7:  Runoff Notes

Pursuant to the Plan, Reorganized WMI issued Runoff Notes in the aggregate original principal amount of $130,000,000.00, maturing on the eighteenth (18th) anniversary of the Effective Date, bearing interest at a rate of thirteen percent (13%) per annum (payable in cash to the extent of available runoff proceeds or in kind through the capitalization of accrued interest at the rate of thirteen percent (13%) per annum to the extent runoff proceeds are unavailable).  The repayment of the Runoff Notes is limited to certain proceeds from WM Mortgage Reinsurance Company, which is a wholly-owned subsidiary of Reorganized WMI.  On May 25, 2012, the Trust was notified that
 
 
 
9
 
 
 
Reorganized WMI had elected to make a payment-in-kind interest payment.  Accordingly, the interest due on the notes was capitalized to the outstanding principal of the notes.   Interest capitalized totaled $3.32 million.

Pursuant to the Plan, creditors were entitled to elect a distribution of Runoff Notes in lieu of Cash received on the Effective Date.  To the extent that eligible Creditors did not elect all of the Runoff Notes, any remaining balance of the Runoff Notes was transferred to the Trust. The Plan provides the conditions under which the Trust can distribute the Runoff Notes.  As of June 30, 2012, the Trust owned $132.4 million of Runoff Notes (including paid-in-kind interest) at face amount and interest receivable of $1.4 million for the benefit of all LTI holders.  In addition, the Trust (through the DCR) holds $38,500 of Runoff Notes (including interest) on behalf of disputed claim holders who elected Runoff Notes in lieu of cash.

In June, $1.195 million of Runoff Notes previously allocated to the DCR were released to the Trust.  The Runoff Notes had been held in the DCR for disputed claimants who had elected Runoff Notes.  The claims of such claimants were disallowed in June, and the Runoff Notes allocated to their claims released to the Trust.  Interest capitalized on the Runoff Notes released to the Trust was $31,000.


Note 8:  Cash Held for Allowed Claims

The Plan requires that holders of Allowed Claims provide releases before receiving a distribution.   Allowed claimants have one year after the Effective Date to provide the release.  The Trust has recorded a liability for cash that would have been distributed to allowed claimants who have not provided their release.  Of the $72.6 million liability for Cash Held for Allowed Claims, $54.9 million is related to claims for which the Trust has not received releases.  The remainder relates to distributions to be made to recently allowed claims or distributions to be paid from the release of funds in connection with disallowed claims on August 1, 2012 or other allowed claims awaiting certain actions.  The cash for these claims is presented as Restricted Cash.


Note 9:  Investment in Subsidiaries

The Trust owns five subsidiaries, directly or indirectly.   These subsidiaries have ceased operations and the aggregate current value of $3.7 million is predominantly comprised of cash and cash equivalents. The Trust will have the subsidiaries retain cash until it can determine that there is minimal risk of future obligations at the subsidiary level.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
10
 

WMI Liquidating Trust
June 2012 Quarterly Summary Report -- UNAUDITED
Rollforward of Liquidating Trust Interests (1)
 
 

                                             
 
Beginning -- 3/31/12
   
Post Effective Accretion
   
Allowed
   
Disallowed
   
Disbursement (6)
   
Other (7)
   
Ending -- 6/30/12
     
6/30/12 -
7/31/12
Accretion
   
Projected
Distribution on
8/1/12
   
Projected 8/1/12
Ending Balance
 
                                                             
                                                             
Senior Notes (Tranche 2)
  86,676,889       721,257       11,515,928       -       (76,545,460 )     -       22,368,613         82,025       13,655,677       8,794,961  
                                                                                 
Senior Subordinated Notes (Tranche 2)
  337,689,636       4,717,135       81,964,043       -       (333,574,057 )     -       90,796,757         506,013       55,429,922       35,872,848  
                                                                                 
CCB (Tranche 3) (2)
  20,678,601       372,859       22,011,440       -       -       -       43,062,900         179,841       -       43,242,741  
                                                                                 
PIERS (Tranche 4) (3)
  167,279,602       (2,617,986 )     50,419,388       -       -       -       215,081,004         (155,681 )     -       214,925,323  
                                                                                 
Remaining Postpetition Interest Claim (Tranche 4) (4)
  45,298,154       270,823       -       -       -       (7,744,469 )     37,824,508         63,797       -       37,888,304  
                                                                                 
Allowed General Unsecured Claims (Tranches 2-4)
  9,820,076       38,120       245,969       -       (4,738,847 )     (380,565 )     4,984,754         8,183       730,065       4,262,872  
                                                                                 
                                                                                 
LTI balances -- Current LTI holders
  667,442,958       3,502,208       166,156,768       -       (414,858,364 )     (8,125,033 )     414,118,536         684,177       69,815,664       344,987,049  
                                                                                 
LTI balances -- Disputed Claims (3) (5)
  352,417,908       2,793,087       (166,156,768 )     (67,804,901 )     (42,736,419 )     8,162,489       86,675,396         137,423       3,940,822       82,871,997  
                                                                                 
TOTAL LTI Balances
  1,019,860,866       6,295,295       -       (67,804,901 )     (457,594,782 )     37,455       500,793,932         821,600       73,756,487       427,859,046  
                                                           
 
 
 
NOTES
       
 
* Holders of Liquidating Trust Interests will receive statements of their individual LTI holdings outlining the respective rollforward activity.
       
  1 )
LTIs are not issued to holders of subordinated claims and equity interests.  Additional LTI's will only be issued to holders of subordinated claims and equity interests if proceeds exceed the face amounts issued to current LTI holders.
       
  2 )
CCB balance excludes the LTI portion allocable to the common stock component of the CCB claim.
       
  3 )
PIERS balance represents "Cap" established due to difference between Federal Judgment Rate and Subordinated Contractual Rates.  The adjustment in the "Post Effective Accretion" column represents the subordination of PIERS to senior levels, reducing the "Cap", or in other words, the highest possible amount that PIERS holders can collect as of the date of this report.
       
  4 )
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 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.
       
  5 )
The LTI balance in the Disputed Claim Reserve also includes allowed claims which have not yet provided valid IRS Form W-8 / W-9 documentation.  As of June 30, 2012, the DCR held $8,209,967 in cash and $68,834,276 of LTIs on behalf of allowed claimants that did not provide the proper tax documentation.
       
  6 )
"Distributions" represent any historical distributions on LTIs, which includes any applicable foreign withholding remittances to the IRS as well as the May 30, 2012 distributions.
       
  7 )
For the quarter ending June 30, 2012, "Other" adjustments primarily consisted of reclasses of certain claims moved to the DCR on account of claimants who did not provide proper tax documentation.

 

 
11
 

WMI Liquidating Trust
Next Dollar Analysis - LTI Balance of June 30, 2012
 

 
Remaining Aggregate Distribution
 
Distribution Description
 
LTI Distribution Recipient (1) (2)
               
 
Up to $120,816,511
 
Until LTI holders of Senior and Senior Sub are paid in full
 
Senior CUSIPs
19.61 %
         
Sr Sub CUSIPs
75.85 %
         
General Unsecured Claims
4.54 %
               
  $120,816,512 - $205,026,913  
Until LTI holders of CCBs claims are paid in full
 
CCB CUSIPs
95.31 %
         
General Unsecured Claims
4.69 %
               
  $205,026,914 - $262,610,541  
Until Debtors begin to pay actual post-petition interest as
 
General Unsecured Claims
4.54 %
     
opposed to by reason of contractual subordination
 
PIERS CUSIPs
95.46 %
               
  $262,610,542 - $500,793,932  
Until LTI holders of Remaining Post-Petition Interest, PIERS and GUC are paid in full
 
Remaining Post Petition
Interest Claim -- Senior Floating
19.13 %
               
         
General Unsecured Claims
4.54 %
         
PIERS CUSIPs
76.33 %
 

 
NOTES:
(1)
 
The percentages represent the percentage of each incremental distributed dollar each group would receive.  The percentages represent the group in total.  Due to various elements including, but not limited to, the pro rata calculation on interest versus principal and the timing of the allowance of a claim, the percentage for an individual claim and/or group will vary from the group's total percentage.
     
(2)
 
The disputed claims (on an "as if allowed" basis) are included in the General Unsecured Claims percentages.
 
 

 
12
 

WMI Liquidating Trust
Next Dollar Analysis - Projected LTI Balance after August 1, 2012 Distributions
 

 
Remaining Aggregate Distribution
 
Distribution Description
 
LTI Distribution Recipient (1) (2)
 
               
 
Up to $47,685,621
 
Until LTI holders of Senior and Senior Sub are paid in full
 
Senior CUSIPs
19.54 %
         
Sr Sub CUSIPs
75.92 %
         
General Unsecured Claims
4.54 %
               
  $47,685,622 - $132,191,149  
Until LTI holders of CCBs claims are paid in full
 
CCB CUSIPs
95.31 %
         
General Unsecured Claims
4.69 %
               
  $132,191,150 - $189,675,654  
Until Debtors begin to pay actual post-petition interest as
 
General Unsecured Claims
4.54 %
     
opposed to by reason of contractual subordination
 
PIERS CUSIPs
95.46 %
               
  $189,675,655 - $427,859,046  
Until LTI holders of Remaining Post-Petition Interest, PIERS and GUC are paid in full
 
Remaining Post Petition Interest Claim -- Senior Floating
19.16 %
               
         
General Unsecured Claims
4.54 %
         
PIERS CUSIPs
76.30 %
 

NOTES:
(1)
The percentages represent the percentage of each incremental distributed dollar each group would receive.  The percentages represent the group in total.  Due to various elements including, but not limited to, the pro rata calculation on interest versus principal and the timing of the allowance of a claim, the percentage for an individual claim and/or group will vary from the group's total percentage.
   
(2)
The disputed claims (on an "as if allowed" basis) are included in the General Unsecured Claims percentages.

 

 
13
 

WMI Liquidating Trust
June 2012 Quarterly Summary Report - UNAUDITED
Rollforward of Disputed Claims Reserve
 

   
Disputed
Assets (4)(5)
   
LTI (4)(6)
   
               
Beginning Balance - 3/31/12
    723,858,692       352,417,908    
                   
Post-effective Accretion on LTI portion
    -       2,793,087    
                   
Net Interest Earned on Disputed Assets
    127,546       -    
                   
Cash Distribution to Disputed LTIs
    42,736,419       (42,736,419 )  
                   
Less:  Allowed Clams (1)(2)
    (17,645,643 )     (166,156,768 )  
                   
Less: Disallowed Claims
    (480,408,364 )     (67,804,901 )  
                   
Other Adjustments (3)
    -       8,162,489    
                   
Ending Balance - 6/30/12
    268,668,649       86,675,396    
 
NOTES:
     
1 )
Cash for allowed claims will be distributed on Aug 1
2 )
Cash payment for allowed claims includes each claim's prorata portion of the interest earned
   
by the DCR after the Effective Date
3 )
"Other Adjustments" primarily represents the reclass of certain claims moved to the DCR on account
   
of claimants who did not provide proper tax documentation
4 )
The LTI balance allocable to the Disputed Claim Reserve also includes allowed claims which have not yet provided
   
valid W8/W9 documentation.  As of June 30, 2012, the DCR held $8,209,967 in cash and $68,834,276 of
   
LTIs for allowed claim holders that did not provide the proper tax documentation
5 )
"Disputed Assets" includes cash held for the benefit of disputed claims as well as Runoff notes elected by
   
disputed claim holders in lieu of cash on the Effective Date
6 )
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
 
 
 
 
14