Berkshire Hathaway Requests Examiner in the Rescap Case

Berkshire Hathaway has filed a request for an examiner in the Rescap bankruptcy. From the Rescap docket:

"Berkshire, which has for several years held in excess of 50% of ResCap’s outstanding unsecured bonds and in excess of 40% of ResCap’s junior secured bonds, has a significant stake in the outcome of these cases. As one of ResCap’s largest non-insider unsecured creditors, Berkshire agrees with the Official Committee of Unsecured Creditors (“UCC”) that an investigation is necessary into the Debtors’ prepetition transactions with Ally and its affiliates, and the settlements underlying the reorganization plan that the Debtors now seek to confirm on a highly abbreviated schedule."

Following this item (embedded below), Ted Weschler, one of the investment manager's Warren Buffett tapped to run Berkshire investment portfolio declared in a declaration of support (Docket #209), reiterates the point above and notes that "With the exception of less than approximately one percent of the face amount of Berkshire's holdings of junior secured bonds, Berkshire purchased its holdings of the unsecured and junior secured ResCap bonds more than two years ago."

Ted Weschler has tremendous experience in bankruptcy as the former chairman of the Equity Committee in W.R. Grace. It is good to see him getting involved in distressed debt again.

As I talked about in my first post and analysis of Rescap, there were a litany of transactions between Ally and Rescap in the years prior to Rescap's recent Chapter 11 filing. From the Berkshire motion:

"Here, the Debtors’ first-day pleadings and public securities filings reveal dozens of transactions with Ally and its affiliates involving billions of dollars of asset transfers and intercompany financing—transactions whose net effect was to transfer a substantial share of ResCap’s operating assets to its parent. The Debtors now seek to release Ally from any claims arising from these transactions, even while they admit that the Debtors possess valid claims against Ally, including for fraudulent transfer, equitable subordination, and alter ego. An examiner should determine whether this proposed release is fair to the Debtors and all their stakeholders."
The Berkshire motion stands in contrast with the Unsecured Creditor's Committee (UCC) of Rescap that has filed a Rule 2004 motion, or a motion for discovery. Examiners and discovery are different animals.  For instance, and again from the Berkshire motion: "this Court can empower the examiner to access the Debtors’ communications with their counsel and other advisors. An examiner therefore can review critical documents and other information that are not available to the UCC."

This is a great read. Enjoy!

Berkshire Hathaway Motion for Examiner in Rescap                                                                                            


Anonymous,  6/07/2012  


I'd be curious if you had any thoughts on Berkshire's stake in Lee Enterprises. The media is reporting this as a straight stock purchase but from the disclosures it seems to me Berkshire acquired its stake during the bankruptcy process as the Company gave its second lien term lenders additional stock as an equity kicker.

Maybe he's been buying additional shares since, but Lee seems like an interesting company -- not only because Buffett is involved -- but since it just came out of a prepackaged bankruptcy where they seemed to make very few changes to their existing debt other than to extend maturities and consolidate some of it and they did not even wipe out all of the existing equityholders.

With Buffett involved the focus is on the equity, but I've been looking at the second lien debt which yields double digits right now.

Anonymous,  6/08/2012  

Berkshire sold its unsecured bonds as of today.

Anonymous,  6/08/2012  

Let's assume that an examiner is indeed appointed in this case. What are the ramifications for Ally?

Alternative Investor 6/11/2012  

So Berkshire have now sold their bonds, anyone any idea of what they got for them?

Anonymous,  6/12/2012  

Isn't Berkshire only interested in Ally's Whole Loan portfolio and not the servicing portfolio? Also did they sell its bonds so that it could make a bid on the whole loans?

Anonymous,  6/13/2012  


How about an update of Arctic Glacier?



hunter [at] distressed-debt-investing [dot] com

About Me

I have spent the majority of my career as a value investor. For the past 8 years, I have worked on the buy side as a distressed debt and high yield investor.