Ditech Holding Corporation
Notes to the Parent Company Financial Statements
1. Basis of Presentation
The financial information of the Parent Company should be read in conjunction with the Consolidated Financial Statements included in this report. These Parent Company financial statements reflect the results of operations, financial position and cash flows for the Parent Company and its investment in consolidated subsidiaries and VIEs, for which it is the primary beneficiary, using the equity method of accounting.
The accompanying Parent Company financial statements have been prepared in accordance with GAAP. The preparation of these Parent Company financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
2. Emergence from the WIMC Reorganization Proceedings
On November 30, 2017, Walter Investment Management Corp. (Predecessor) filed the WIMC Bankruptcy Petition under the Bankruptcy Code to pursue the WIMC Prepackaged Plan announced on November 6, 2017. On January 17, 2018, the Bankruptcy Court approved the amended WIMC Prepackaged Plan and on January 18, 2018, entered a confirmation order approving the WIMC Prepackaged Plan. On February 9, 2018, the WIMC Prepackaged Plan became effective pursuant to its terms and Walter Investment Management Corp. emerged from the WIMC Chapter 11 Case and changed its name to Ditech Holding Corporation (Successor) and on February 12, 2018, our newly issued common stock commenced trading on the NYSE under the symbol DHCP. From and after effectiveness of the WIMC Prepackaged Plan, the Parent Company has continued, in its previous organizational form, to carry out its business.
The impact of the WIMC Reorganization on the Parent Company's debt and equity is discussed in further detail in Notes 20, 23 and 25 to the Consolidated Financial Statements.
Liabilities Subject to Compromise
Liabilities subject to compromise included unsecured or under-secured liabilities incurred prior to the WIMC Petition Date. These liabilities represented the amounts that were expected to be allowed on known or potential claims to be resolved through the WIMC Chapter 11 Case and were subject to future adjustments based on negotiated settlements with claimants, actions of the Bankruptcy Court, rejection of executory contracts, proofs of claims or other events. Generally, actions to enforce or otherwise effect payment of prepetition liabilities are subject to the automatic stay or an approved motion of the Bankruptcy Court.
The Parent Company's liabilities that were subject to compromise consisted of the following (in thousands):
December 31, 2017
Accrued interest (1)
Total liabilities subject to compromise
Represents accrued interest on the Senior Notes and Convertible Notes as of November 30, 2017, the date the Company filed the WIMC Bankruptcy Petition. As interest on the Senior Notes and Convertible Notes subsequent to November 30, 2017 was not expected to be an allowed claim, this amount excludes interest that would have been accrued subsequent to November 30, 2017. Interest expense reported on the Parent Company statements of comprehensive income (loss) for the period from January 1, 2018 through February 9, 2018 and the year ended December 31, 2017 excludes $5.9 million and $4.4 million, respectively, of interest on the Senior Notes and Convertible Notes that otherwise would have been accrued for the period.
On the WIMC Effective Date, all of the Parent Company's obligations under the previously outstanding Convertible Notes and Senior Notes listed above were extinguished. Previously outstanding debt interests were exchanged for Second Lien Notes, common stock, Mandatorily Convertible Preferred Stock, Series A Warrants and/or Series B Warrants, as applicable.