WMC Mortgage in bankruptcy, looks to fund plan with settlement payment

By Caroline Salls

Pittsburgh, April 23 – WMC Mortgage, LLC filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Chief executive officer, president, general counsel and chairman Mark V. Asdourian said in a statement filed with the court that WMC, directly and through various predecessors, was in the business of originating residential mortgage loans, but that business was “decimated” in the wake of the Great Recession.

Asdourian said WMC has been able to settle a large part of litigation filed against it over the past decade, primarily consisting of contract breach actions.

Over this period, the statement said WMC paid more than $1.5 billion in settlements, with about 85% of those settlement payments being funded through capital contributions made by GECUSH and, before December 2015, its predecessor, General Electric Capital Corp. (GECC).

In addition, Asdourian said WMC and GECC have been the subject of an investigation by the Civil Division of the Department of Justice in connection with potential violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 arising out of WMC’s origination, purchase or sale of residential mortgage loans.

Under a settlement with the DOJ, General Electric Co. paid $1.5 billion in settlement of these claims on April 18.

Asdourian said WMC now has limited remaining assets but has reached an agreement in principle that calls for a release of remaining claims against GE in exchange for cash payment.

Once finalized, WMC will seek approval of this settlement in connection with its plan confirmation process, and settlement proceeds will be used to fund distributions to creditors.

To fund the projected costs of the Chapter 11 case and enable WMC to pay salaries and benefits of its employees, other ordinary course post-bankruptcy obligations, conduct negotiations with key constituents, complete the GE settlement and confirm a plan, Asdourian said GECUSH has committed to provide up to $25 million of debtor-in-possession financing to WMC.

The company is seeking interim access to $1.75 million of the DIP financing.

Interest will accrue at a rate of Libor plus 500 basis points.

The facility will mature on the earliest of Jan. 23, 2020, the effective date of a Chapter 11 plan, the date of acceleration of the DIP financing obligations, the occurrence of an event of default and the date of the filing of a plan that is not acceptable to the lender.

According to court documents, WMC Mortgage has $1 million to $10 million in assets and $100 million to $500 million in debt.

The largest unsecured claims listed by the debtor include several litigation claims and indemnification claims, all in undetermined amounts. The litigation claims are held by SABR 2006-WM2 trustee TMI Trust Co. of New York, Alvaro E. Calderon of El Monte, Calif., Jung Hyun Cho, Kyu Hwang Cho, Eun Sook Cho and Eui Hyun Cho of Sacramento, Odilia Lopez of Santa Ana, Calif., Ronald and Janet Pirrelli, represented by James D. Reddy of Lindenhurst, N.Y., and Jose Rodrigues, represented by Joshua Thomas of Chadds Ford, Pa.

The company is represented in its Chapter 11 proceedings by Richards, Layton & Finger, PA.

WMC is a Woodland Hills, Calif.-based mortgage originator. The Chapter 11 case number is 19-10879.

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