ACTION: On April 1, 2009, shares of Walter Industries, Inc. (“WLT”) will trade on the New York Stock Exchange (NYSE) without entitlement to the value of an anticipated merger of Walter Investment Management LLC (“SPINCO”) and Hanover Capital Mortgage Holdings, Inc. (“HCM”). The merger is anticipated to become effective on April 17, 2009. The NYSE has directed that due bills for the merger consideration accompany WLT transactions made prior to April 1, 2009. Immediately prior to this anticipated merger, WLT will spin off SPINCO shares to WLT shareholders. The distribution ratio will be 1 for 1. Also immediately prior to the merger, SPINCO shares will declare a dividend in an amount to be determined. This dividend will be subject to an election to receive payment in the form of cash or additional SPINCO shares. Non-electing SPINCO shares will receive the dividend in the form of additional shares. The election deadline is 5:00 P.M. New York City Time on April 13, 2009. In the anticipated merger, each share of SPINCO will be entitled to receive approximately .3633 shares of HCM. Cash will be paid in lieu of fractional shares. The HCM shares to be received in the merger will reflect a 1 for 50 reverse split for HCM. Additionally, HCM will be renamed Walter Investment Management Corp. (“WAC new”). Note: it is OCC’s understanding that the merger consideration of approximately .3633 shares of HCM (“WAC new”) shares includes HCM (“WAC new”) shares receivable in respect of the SPINCO dividend mentioned above. In summary, if the merger is consummated and no election with respect of the SPINCO dividend is made, WLT shares purchased before April 1, 2009 (settlement date April 3, 2009 and earlier) will be entitled to receive the additional consideration of approximately .3633 shares of WAC new shares (with cash paid in lieu of fractional shares). Please note existing WLT shares will not be converted in the merger. The merger will affect only the distributed SPINCO shares.
This corporate event will be coordinated with the Options Clearing Corporation.
CATEGORY: Stock Dividend
EQUITY SYMBOL: Walter Industries, Inc. (“WLT”)
ONECHICAGO SYMBOL: WLT1C changes to WLT2C; a new WLT1C will be re-listed on Thursday, April 2, 2009.
CME FUTURES SYMBOL: WL8 for the WLT2C; WLT for the re-listed WLT1C
EFFECTIVE DATE: Wednesday, April 1, 2009
MULTIPLIER: 100 (e.g., 1.00 equals $100.00)
NEW DELIVERABLE PER CONTRACT: For the WLT2C:
1) 100 Walter Industries, Inc. (“WLT”) Common Shares
2) 36 Common Shares of (New) Walter Investment Management Corp. (“WAC new”) plus cash in lieu of approximately .33 fractional WAC new shares receivable upon the effectiveness of the merger of “SPINCO” with Hanover Capital Mortgage Holding, Inc. (“HCM”). (These shares are receivable in respect of the distribution of 100 SPINCO shares.) The Merger is anticipated to be effective April 17, 2009.*
*The cash portion of the deliverable remains permanently fixed as part of the option deliverable, and does not vary with price changes of securities also included in the deliverable
For the re-listed WLT1C:
100 Walter Industries, Inc. (“WLT”) Common Shares
APPLICABLE CONTRACT MONTHS: April, May, June, September 2009
SETTLEMENT PRICES AND POSITIONS: The underlying price for WLT2C will be determined as follows:
WLT2C = WLT + .36 WAC + Cash in lieu
Please note that the valuation would apply only to the WLT2C deliverable in terms of current market value of the deliverable securities. The resulting price would not be equivalent to the daily settlement price of a futures contract month, whose determination would include cost of money carrying charges, adjustment for dividends, and other factors.
NOTES: The forecasted effect of the upcoming corporate event on each clearing firm’s positions can be viewed in infopac in the Corporate Event Initial Forecast Report (ONE712), the Corporate Event Final Forecast Report (ONE713), and the Corporate Event Forecast Audit Report (CPDBU710).
The details after the corporate event has been applied can be viewed in the Corporate Event Activity Report (ONE711).
If you have any questions regarding the information provided in the document, please call CME Clearing Risk Management hotline at (312) 648-3888.