Seventeen RMBS institutional investors represented by Gibbs & Bruns and Ropes & Gray have reached an agreement with Residential Capital (ResCap) and its affiliated debtors.
The firms' clients will support ResCap's bankruptcy plan in return for a settlement of their rep and warranty claims. ResCap will stipulate $8.7 billion in rep and warranty claims worth 3.9% of the $221 billion in original unpaid principal balance. The claims are on 392 securitization trusts issued by ResCap's affiliates between 2004 and 2008.
The holders will receive recoveries on the claim on a pro-rata basis with other senior unsecured creditors. They have more than $13 billion in outstanding RMBS securities issued by over 350 of the covered trusts.
Institutional investors have over 25% of at least one class in 290 of the trusts worth $164 billion in the unpaid principal balance.
Barclays Capital analysts estimated that the current face value of the 392 trusts is now at $63 billion, which means an average stipulated claim of 13.8% to MBS holders.
With recoveries of 25% on the senior unsecured claims, MBS holders can get an average payout of 3.5% of current face or $2.2 billion in proceeds as soon as the bankruptcy plan is approved and executed, analysts said.