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Luke 532

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    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Plaintiffs will argue that that the potential damages should be PAR + carried interest every year (i think its 6% simple in Delaware) since the NWS. that's how he gets > PAR but along shot if you ask me.

     

    I've always considered this as nothing more than a negotiation tactic by plaintiffs.  I would argue for it, too, if I were a plaintiff.  Ask for par plus 6% annually, but be willing to accept par or something slightly beneath par.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    What i was referencing was a podcast Sullivan had right after the en banc decision in which he said  that he "knew" or talked to people who expected to get way more then par via "damages" in a settlement with treasury. That narrative is what I think is false.

     

    Sullivan has mentioned a couple times on podcasts that he heard David Thompson on one of those public Investors Unite calls where he (Thompson) mentioned 6% annual interest (not sure if compounded or simple interest) since 2012, on top of par, as part of a settlement package.  I don't recall Thompson saying that, but I haven't listened to all the IU calls.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Calabria last month also said this: Re-proposal would delay final rule until "spring" and "closer to May;" also said that capital rule & PSPA would be done "hopefully middle of next year." "Capital rule... on its own timeline... changes to PSPA... on its own timeline... hopefully be done by the middle of next year"

     

    So capital rule and PSPA to be completed by middle of next year and are independent of each other. Now whether you want to take his word at face value is up to you as he is losing credibility by the day.

     

    Capital rule doesn't necessarily have to take place before a settlement.  I'm not saying that you're saying this, allnatural, but more of a general comment for everybody to think about.  Tim Howard and Rule of Law Guy discussed this yesterday afternoon starting with comment 13564.  Link here: https://howardonmortgagefinance.com/2019/10/21/some-simple-facts/#comment-13564

     

    Howard: I don’t know why there couldn’t be a settlement between plaintiffs and the government on the net worth sweep and liquidation preference issues in the absence of a final capital rule. The two are related, but the first two are not dependent upon the last. In any case the companies will need to have built a significant capital base through retained earnings before they can do a public offering, and this will take time. Provided that FHFA does produce a final capital rule by the end of next year, we should still be on track for the sort of “staged release” from conservatorship that Treasury and FHFA have been describing over the past several months: final capital rule, settlement with plaintiffs canceling the net worth sweep and liquidation preference (with these now possibly being reversed in the sequence), negotiation with the companies of a consent decree governing...

     

    ROLG:  Tim is absolutely correct that a litigation settlement that eliminates the senior preferred could be negotiated prior to the adoption of the final capital rule, and I believe that once this settlement is reached, there would be massive financial exposure to the govt in the event a successor FHFA director tried to reverse any such settlement. the practical reality of this administration’s actions to date, however, is that what has been thought to be able to be done relatively quickly actually gets done quite slowly. In terms of the effect of delay upon the settling parties, usually the party that has the “most to lose” from a settlement delay must consider “giving up” more to get the settlement done sooner rather than later…and that party in this case would be GSE shareholders.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    I should clarify that "near-term" means to me by the end of the first half of 2020 (could be tomorrow, next week, 6 months from now, etc.).  I do think a settlement has a really good chance of happening between now and then for a variety of reasons that others and I have discussed on the board, including recent comments by Phillips two weeks ago that unfortunately I've been asked not to share. 

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    For those still excited about the near term outlook -- what specific catalyst do you see? 

     

    The catalyst I see is the only one that really matters to pref holders: settlement.  Can happen at any moment without warning.

     

    Thanks, Luke.  Sure, it's possible.  But not likely over the near term.  First, there's waiting for the SC ruling on whether it takes Collins.  Second, why slow play the capital rule finalization (post comments) until 2h 2020+ if you intend to settle in 1h 2020?  Calabria's more talented than taking 15 months from his start to get the capital rule in place -- it's clear to me that he's been told to slow play. 

     

    Trump probably sided with the Kudlow and political wing during the summer.  I'm guessing Calabria is sympathetic to us and has tried to soften the timing delay announcements over the past 2 weeks by a) including consent decree statement last week and b) scheduling the capital rule disappointment on same day of what he perhaps hoped was a good day with Sweeney. 

     

    Our response due to the SC in Collins next Friday should be interesting.  I wonder if our lawyers have tilted towards the higher risk higher potential reward outcome of directly or indirectly asking the SC to take the APA (and constitutional).

     

    Settlement doesn't have to wait for anything else to happen. There are no prerequisites to a settlement. It can happen at any moment.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    In the last month we have seen 2 "political" investments blow up in investors face. First PCG, now Intelsat (down over 50% in 3 days). The distressed / credit investor crowd has been involved in all 3 of these situations all year. It isnt rocket science to figure out why the GSEs PFDs have been getting smoked during the same week as the Intelsat blow up. The shareholder overlap is enormous and after 2 political blowups they are de-risking and taking one of their only winners for the year (GSEs) off the table. There is a reason PFDs are down almost 2x as much as common in the last few days as most of these funds are weighted towards the PFDs. Calabria being wishy washy on timing only adds salt to the wound at this point.

     

    Check out the share price performance of the PFDs during the week of the PCG blow up as well.

     

    All the more reason to discount recent price action in the GSE prefs.

     

    Allnatural nailed it!  Well done!

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    In the last month we have seen 2 "political" investments blow up in investors face. First PCG, now Intelsat (down over 50% in 3 days). The distressed / credit investor crowd has been involved in all 3 of these situations all year. It isnt rocket science to figure out why the GSEs PFDs have been getting smoked during the same week as the Intelsat blow up. The shareholder overlap is enormous and after 2 political blowups they are de-risking and taking one of their only winners for the year (GSEs) off the table. There is a reason PFDs are down almost 2x as much as common in the last few days as most of these funds are weighted towards the PFDs. Calabria being wishy washy on timing only adds salt to the wound at this point.

     

    Check out the share price performance of the PFDs during the week of the PCG blow up as well.

     

    All the more reason to discount recent price action in the GSE prefs.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Calabria moments ago.  Sounds like consent decree is all but a given at this point...

    "There will be a level of capital where we think it sufficient to let them out of conservatorship but are not adequately capitalized. During that they will operate under a consent decree." - @FHFA @MarkCalabria #mortgagesummit

     

    some smart guy wrote the attached

     

    That rolg is a smart guy.  I see a lot of similarities between you and him. :)

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