Risk Factors Dashboard
Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.
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Risk Factors - WBQNL
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Item 1A. Risk Factors” of this Annual Report. Accordingly, the Trust cannot guarantee that any forward-looking statements will be realized, as actual results may differ materially from those identified or implied in any forward-looking statement. Accordingly, the Trust cannot guarantee that any forward-looking statements will be realized, as actual results may differ materially from those identified or implied in any forward-looking statement. These risks and uncertainties are beyond the ability of the Trust to control, and in many cases, the Trust cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. These risks and uncertainties are beyond the ability of the Trust to control, and in many cases, the Trust cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements.
In connection with the “safe harbor” provisions of the Acts, the Trust has identified and is disclosing important factors, risks and uncertainties that could cause its actual results to differ materially from those projected in forward-looking statements made by the Trust, or on the Trust’s behalf. (See “Item 1A. Risk Factors” of this Annual Report.) These cautionary statements are to be used as a reference in connection with any forward-looking statements.) These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of the Trust’s subsequent filings with the SEC. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of the Trust’s subsequent filings with the SEC. Because of these factors, risks and uncertainties, the Trust cautions against placing undue reliance on forward-looking statements. Although the Trust believes that the assumptions underlying forward-looking statements are currently reasonable, any of the assumptions could be incorrect or incomplete, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date on which they are made. Except as may be required by law, the Trust does not undertake any obligations to modify, update or revise any forward-looking statement to take into account or otherwise reflect subsequent events, corrections in or revisions of underlying assumptions, or changes in circumstances arising after the date that the forward-looking statement was made. Except as may be required by law, the Trust does not undertake any obligations to modify, update or revise any forward-looking statement to take into account or otherwise reflect subsequent events, corrections in or revisions of underlying assumptions, or changes in circumstances arising after the date that the forward-looking statement was made.
A. | Overview |
The Trust and its wholly-owned subsidiary Woodbridge Wind-Down Entity LLC (the “Wind-Down Entity”) were formed pursuant to the Plan. The purpose of the Trust is to prosecute various causes of action owned by the Trust (the “Causes of Action”), to litigate and resolve claims filed against the Debtors, to pay allowed administrative and priority claims against the Debtors (including professional fees), to receive cash from certain sources and, in accordance with the Plan, to make distributions of cash to Interestholders subject to the retention of various reserves and after the payment of Trust expenses and administrative and priority claims. The Trust has no other purpose. The Trust has no other purpose. Sources and potential sources of cash include the net proceeds from settlements of various Causes of Action, remittances of cash distributed from the Wind-Down Entity, “Fair Fund” recoveries from the SEC, and assets forfeited to the U.S. Department of Justice (“DOJ”) by former owners and principals of the Debtors (“Forfeited Assets”).
The Wind-Down Entity was formed to develop (as applicable), market, and sell the real estate assets owned by its subsidiaries (the “Wind-Down Subsidiaries” and, with the Wind-Down Entity, the “Wind-Down Group”), in order to generate cash to be remitted to the Trust after the payment of Wind-Down Group expenses and subject to the retention of various reserves. The Trust, the Remaining Debtors (as defined in Section B of this Item 1) and the Wind-Down Group are collectively referred to in this Annual Report as the “Company.”
Most of the Debtors filed for chapter 11 bankruptcy protection in December 2017 (certain other Debtors filed cases on later dates). During the Bankruptcy Cases, the major constituencies reached agreements on several matters, including new management for the Debtors, the manner and timing of the liquidation of the Debtors’ assets, and relative priorities to such distributions among creditors. During the Bankruptcy Cases, the major constituencies reached agreements on several matters, including new management for the Debtors, the manner and timing of the liquidation of the Debtors’ assets, and relative priorities to such distributions among creditors. Certain of these agreements were embodied in the Plan, which was confirmed in October 2018 and became effective on February 15, 2019. Under the Plan, holders of certain claims against the Debtors received Class A Interests, which became registered pursuant to Section 12(g) of the Exchange Act on December 24, 2019.
The Trust will be terminated upon the first to occur of (i) the making of all distributions required to be made and a determination by the “Liquidation Trustee” that the pursuit of additional Causes of Action held by the Trust is not justified or (ii) March 31, 2026, subject to the extension of such date with the approval of the Bankruptcy Court. During the year ended June 30, 2023, the Company concluded that its liquidation activities would not be completed by February 15, 2024, which was the original outside termination date of the Trust, for a number of reasons. During the year ended June 30, 2023, the Company concluded that its liquidation activities would not be completed by February 15, 2024, the current outside termination date of the Trust, for a number of reasons. First, there had been significant delays in certain legal proceedings where the Company was the plaintiff. First, there have been significant delays in certain legal proceedings where the Company is the plaintiff as more fully described in "Item 3. Legal Proceedings". Second, a construction defect claim was asserted against one of the Wind-Down Subsidiaries (the “Development Entity”) by the buyer of a single-family home sold by the Development Entity. Based on these factors, the Company projected a revised estimated completion date for the Company’s operations of approximately March 31, 2026 and filed a motion with the Bankruptcy Court to extend the termination date of the Trust to that date. This motion was granted by the Bankruptcy Court on December 20, 2023. However, the Company may seek one or more additional extensions of the termination date if it deems it necessary or appropriate to facilitate the orderly liquidation of the Trust’s assets, the resolution of the construction defect claim against the Development Entity, or the resolution of the Company’s claims against its insurers and other third parties in connection with the construction defect claim.
The Trust is administered by a Liquidation Trustee. The Liquidation Trustee is authorized, subject to the oversight of a supervisory board currently consisting of five members (the “Supervisory Board”), to carry out the purposes of the Trust. The Wind-Down Entity is currently managed by a “Board of Managers” consisting of a single member.
Pursuant to the Plan and the Liquidation Trust Agreement of the Trust (as amended, the “Trust Agreement”), a copy of which is referenced as Exhibits 3.2, 3.3, 3.4 and 3.5 to this Annual Report, distributions to Interestholders are made after giving effect to the payment of costs and expenses incurred by the Trust, including the cost of collecting, administering, distributing, and liquidating the Trust assets such as fees and expenses of the Liquidation Trustee, premiums for directors’ and officers’ insurance, fees and expenses of attorneys and consultants and the retention of reserves. Furthermore, cash received by the Trust from the Wind-Down Group is net of the payment of Wind-Down Group costs and the retention of reserves by the Wind-Down Group for contingent liabilities. Furthermore, cash received from the Wind-Down Group is net of the payment of Wind-Down Group expenses and the retention of reserves by the Wind-Down Group for contingent liabilities, including potential construction defect claims.
Part I
Item 1. | Business (Continued) |
Distributions will be made by the Trust only to the extent that the Trust has sufficient net assets to make such payments in accordance with the Plan and the Trust Agreement. No distribution is required to be made to any Interestholder unless such Interestholder is to receive in such distribution at least $10.00. If the Trust mails a distribution check to an Interestholder and the Interestholder fails to cash the check within 180 calendar days, or if the Trust mails a distribution check to an Interestholder and such check is returned to the Trust as undeliverable and is not claimed by the Interestholder within 180 days, then the Interestholder may not only lose its right to the amount of that distribution, but also may be deemed to have forfeited its right to any reserved and future distributions under the Plan. No distribution is required to be made to any Interestholder unless such Interestholder is to receive in such distribution at least $10.00. If the Trust mails a distribution check to an Interestholder and the Interestholder fails to cash the check within 180 calendar days, or if the Trust mails a distribution check to an Interestholder and such check is returned to the Trust as undeliverable and is not claimed by the Interestholder within 180 days, then the Interestholder may not only lose its right to the amount of that distribution, but also may be deemed to have forfeited its right to any reserved and future distributions under the Plan. Since the Plan Effective Date, the Liquidation Trustee and the Supervisory Board have authorized eleven cash distributions to the holders of Class A Interests. Since the Plan Effective Date, the Liquidation Trustee and the Supervisory Board have authorized eleven cash distributions to the holders of Class A Interests.
On August 3, 2023, the Supervisory Board, at the recommendation of the Liquidation Trustee, suspended the making of additional Trust distributions to Interestholders, pending the result of the investigation of a construction defect claim asserted against the Development Entity by the buyer of a single-family home sold by the Development Entity. Holders of Liquidation Trust Interests are advised that to date, the Trust has liquidated substantially all of its real estate assets, and given the pending construction defect claim, the Trust is unable to estimate the timing and amount of future distributions, other than the distribution described below solely in respect of Forfeited Assets to be made to Qualifying Victims1.
On September 19, 2024, a distribution of the net sales proceeds of the Forfeited Assets of approximately $4,100,000 was approved which represents a distribution of approximately $4.65 per $1,000 of Total Net Qualifying Victim Claims. The Trust expects to make the distribution, which is to be paid solely to Qualifying Victims, as soon as practicable following the sale of the last Forfeited Asset, which is expected to occur by December 31, 2024.
1 Pursuant to an agreement with the DOJ, the Trust is required to distribute the net sale proceeds from the Forfeited Assets to the Qualifying Victims. Qualifying Victims consist of the former holders of allowed Class 3 and Class 5 claims as of the Plan Effective Date and their permitted assigns, but do not include former holders of Class 4 claims. Distributions to Qualifying Victims are to be allocated pro-rata based on their net allowed Class 3 and Class 5 claims (“Net Allowed Class 3 and Class 5 Claims”) plus unresolved Class 3 and Class 5 claims without considering the (i) 5% enhancement for contributing their Causes of Action and (ii) 72.5% Class 5 coefficient. As of June 30, 2024, the Net Allowed Class 3 and Class 5 Claims were approximately $881,540,000 and net unresolved Class 3 and Class 5 net claims were approximately $50,000 (together referred to as the “Total Net Qualifying Victim Claims”). Because of the requirement to distribute the net sale proceeds of