Creditors paid in full? No – try 6 cents on the dollar

Talk about ugly, American Home Mortgage, an outfit which went bust two days before the credit crunch hit a year ago, is now liquidating. We knew equity holders were going to get zippo, nada, zilch, but what about creditors of the mortgage finance company?

They are getting 5.9 cents per dollar owed at most. As my English teacher used to tell me, “Edward, that ain’t good.”

American Home Mortgage Investment Corp AHMIQ.PK, which was among the largest U.S. home loan providers before seeking bankruptcy protection a year ago, said it will pay unsecured creditors no more than 5.9 cents on the dollar as it liquidates assets.

In a disclosure statement filed Friday with the U.S. bankruptcy court in Wilmington, Delaware, the company said many unsecured creditors will recover zero to 2.2 cents on the dollar on their claims.

Creditors whose claims are backed by collateral will recover the full amounts owed, it said. Shareholders will get nothing.

Reuters, 19 Aug 2008

Pretty scary stuff, huh? I bet you some writedowns are coming on the back of this one. If I can get my hands on the court filings I might even be able to figure out who the lucky creditors are. Look at this bankruptcy filing as a harbinger of what’s to come.

Update: Newsday shows who the top creditors are.

The bankruptcy filing listed assets of $20.6 billion and debts of $19.3 billion — but those figures came from the quarter ending March 31, before writedowns on the company’s portfolio led lenders to demand repayment, ultimately bankrupting the company.

Court papers revealed that the company had been engaged in “active, around-the-clock negotiations” for a week starting July 27 with at least four potential purchasers of its loan origination divisions, but said none of those transactions had panned out.

The company’s top creditors read like a who’s who of Wall Street: Deutsche Bank, JPMorgan Chase, Bank of America and Citigroup are in the top 11.
Newsday, 7 Aug 2007

We should expect some writedowns out of this from Citi, Deutsche, JPM and BofA et al.

  1. MAB says


    It would still be interesting to see the full list of creditors. Non-household names like “Whistle Jacket” might be listed.

    It’s unclear to me that all the SIVs and other off balance sheet entities are contractually backed by the sponsoring bank. I know Legg Mason has eaten substantial losses in order to avoid breaking the buck in their money market funds.

    I’ve been harboring a mountain of worry about money funds. Absent Bernanke’s alphabet soup schemes, I suspect a lot of money funds would have been looking at haircuts.

    In March, during the Bear Stearns panic, the spread on five year TIPS was negative. Very strange. And scary.

  2. Edward Harrison says

    I would like to see more creditors listed there as well. My main interest, though, is seeing where the greatest writedown exposure lies amongst large financial institutions that supply credit.

    As far as breaking the buck at money market funds goes, I remember BofA doing the same thing.

    Interesting times, my friend.

Comments are closed.

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