orthopa

Taking the last couple of days unless you think preferred gets less then 50%ish in a conversion it makes sense to keep adding or even lever up if you have the balls. 8)

I would be extremely careful when trying to apply the Moelis plan. It includes all of 2021's earnings being retained towards the capital base. You will have to add that to the equity raise too. Page 25 has the earnings projections, which exceed earnings from 2014-2018 by a decent amount. The administration's talk of reducing FnF's footprint directly counters this. I would expect FnF's earnings to go down post-conservatorship, not up. It has the juniors converting at 1.75 to 1, when the market ratio is more than twice that. Why would they accept such a bad conversion ratio? The SPO investors get less than half of the equity in return for $75B in capital. They are providing the lion's share of the capital and are in a position of strength. Are they really going to settle for that little, especially with footprint reduction looming? I also wouldn't take the $100B ball that Mnuchin lobbed and take off with it just yet. Calabria will be setting the final capital requirements, and he pegged it at "years and years" of retained earnings. I don't think he meant 4 or 5, which is what $100B would represent. I agree on the caution and overlooked the 2021 retained earnings as you point out. Im too lazy to run the numbers but with preferred ~ a double from here depending on class IMO it still doesn't look like common clears the hurdle vs preferred based on my superficial assessment in addition to what you said.

Moelis has projection of 100B in captial with price before 10% appreciation at $11.73 @ 8.4 eps. That projects sweep ending in Q4 18 so will need to adjust for money swept of 3.2B+2.4B+/- 3.4B. So will need additional 5.9-9.3Billion. Just need to project for likely higher preferred capital conversion and could get pretty close to where things may end up. so $9-10 per share not withstanding any other "private capital". So a double from here?

NWS ending by the end of this month seems a certainty by now by Mnuchins comments.

It's important, imo, that if things do ever reach settlement discussions, that the plaintiffs resist any potential urge for excess greed. Agreed, but keep in mind 150% is what they're asking at the start. Not likely to be the minimum they'd settle for. At some point, now that we have a court that agrees that the NWS was illegal, there needs to be compensation for unpaid dividends that very-well could have been paid if the govt hadn't stolen the funds. We're never going to be made entirely whole if you want this to happen quickly, but I have a hard time characterizing asking for what you're owed as being greedy. Methinks this gets settled somewhere between 100-125% of par and we move forward with the remainder coming out in a favorable conversion ratio into common as part of the recap. This form of relief seems to be something that has just came up very recently. Is this/has this been documented anywhere? I'm all for whatever they can get but where does the 150% come from? When would the preferred have been able to pay a dividend? Not until after the 10% moment and company recapped right? I dont think you can look at the funds just paid over 10% as divs would not have been paid out while still in conservatorship? The immediately blowback you would get with what you suggest (and Im all preferred so Im all for it) is that your screwing the common. They will not want to hear the divs would have been paid if recapped and money not taken but its true. When they would have left conservatorship is really the question then. Is the 150% coming from total par value of all jr preferred plus some of the 25B that would be returned via a tax credit?

I dont have all of the preferred tickers in front of me but looks like the previous gap implied by dividend is closing.

Wasnt the Sr Preferred "always" going to get cancelled and NWS going to end to move forward with recap? Treasury plan laid these options out pretty clearly. If one bought assuming par value for preferred at some value for common this was always pretty much assumed IMO. I would also add what ever private capital offering occured would effectively lower the level of treasury ownership if it happened according to cherzeca's layout before public offering.

I follow him on twitter. Pretty with it from the GSE standpoint. Not unrealistic, pretty bright it seems. Worth a follow. I agree what Mnuchin said was huge. NWS ending soon and he wants to giddy up on this. No more messing around it seems. No more dicking around. I still find it interesting that he is still waiting on congress or perceives they will in regard to recap (maybe I have to re listen to interview) since congress isn't needed for what FHFA and Treasury can do on their own.

Have to watch again but it seems like there is finally some urgency and Housing Reform is front and center. Mnuchin all for stopping NWS and building capital through retained earnings. Thats great coming straight from the Secretary of the Treasury.

Agree. Mnuchin just said NWS ending and Treasury going to negotiate per plan. Sounds like more then 40% of par of me.

Mnuchin said FnF will start to retain captial in near term. Hoping to do in September have to negotiate with FHFA. NWS ending soon as expected, finally.

I would also add any settlement will reflect highly on the preference of the big preferred holders, Paulson et al. We are going to ride their coat tails who are we kidding? There is still a lot of post ruling euphoria in the air affecting a lot peoples judgement. I'm going to refrain from un realistic expectations or calculations in the mean time. Seems like only a let down can come with that thinking.

Im all preferred so I would love 150% of par too but unless there is some other form or relief that is not widely known then again I don't see how this is realistic. Dont forget there is another side in the negotiation too. Treasury is still right this second lined up to sweep Q3 profits unless something changes so it isnt like your dealing with the most kind hearted party who is still actively defending the law suits. Unless forced by a court to settle/pay damages at some point I can see Treasury/FHFA say fuck you guys and your unrealistic expectations and drag this shit out and put the entire recap at risk if trump loses in 2020. Thats a pretty good come back to an unrealistic negotiation stance. Shit it took treasury 6 months to come up with a plan. Treasury and FHFA could slow play the capital rules and recap and we could still be without a settlement or any means of recap next fall. Unrealistic I know but it isnt like the other party in the negotiation is completely in a corner. We are more or less playing by their rules remember? cherzeca a question for you. Can Ps in Collins request a different form or relief then what was? If not any settlement terms such as more then par would have to come out of the goodness of treasuries heart right? I think any extra compensation treasury gives in any fashion to preferred will be in a conversion to common. I would like to think treasury would be much more likely to keep compensation in form of a security/warrant/tax break then a cash or similar payment as some have been discussing in the fannie world.

Yes, that or an agreement to be converted at par with an anti-dilution clause. It's possible plaintiffs ask for more than par given they have some leverage now. Ok so your impression is that the overpayment ~20B flows to the preferred in one of the above ways and not via the two methods of relief that were proposed by the plantiffs? I guess thinking this out this flows down the captial structure as a pay in kind dividend or non dilution clause benefit in an exchange? Can treasury effectively pay a dividend if the company wasnt in a "safe and sound" condition? I guess just looking at this right now, NWS likely to end say in 3 weeks. Treasury and FHFA will likely be willing to get things moving with FHFA removal ruling but with relief prospective are they going to feel compelled to give up a lot? I just feel like its easy to jump to assuming there will be a settlement but are they in a position where they have to? I dont know.

I'm more interested what the stock does two weeks from now. I bet we get either NWS ended/modified or a settlement by then. Not being obtuse but isnt the "settlement" the NWS ending? Does the recap timeline now with Calabria maybe out by early 2021 afford time for a cert to the SCOTUS and then a ruling by the district court? I guess my fear now is this hanging over and delaying any recap that could be put in motion unless any settlement was tax credits etc that could be instituted at any time.

This is going to sound strange, but I think it will be rather flat overall. The weekend is enough time to digest the fact that the en banc panel did not grant the plaintiffs the big awards some were expecting. It's the same as the Treasury plan, many who bought in hopes that Treasury would say something really shareholder-friendly were disappointed. I can't put my finger on it, but for some reason I am underwhelmed by the opinion. I think it gives plaintiffs more settlement leverage but that's it. If the case ever gets to trial it means that the administration isn't nearly as committed as we thought to recap and release. Midas, don't you think that the wording "prospective relief is the proper remedy" will provoke a buying stampede on Monday morning? Doesn't this mean that whoever held in the past and sold is out of luck but whoever buys on Monday and holds is in possession of the lucky ticket, whenever the rewards come? Sort of a sprint to get in through a really narrow door... buy first, ask questions later. My thinking is kind of along the same lines of Midas. Shit, I would love a huge up day monday but to me, it looks like the "prospective relief" was going to happen anyway. The Treasury plan said so didnt it? My read on the Treasury plan was the NWS modification or end was coming soon, next 3 months so maybe this does push things up but in the end even if the Q3 payment is swept its what a ~3B difference? Then again I saw the NWS stopping as a significant driver of a partial move to par so maybe the stock will pop. I think the removal for cause ruling certainly could move things up or put a giddy up on things. If Calabria is at risk of being out by early 2021 all or a significant amount of the recap needs to be done. I see many people beating their chests and ecstatic that its on paper that the NWS was illegal and that justice has finally been served by the courts but unless Calabria/Mnuchin act sooner then they were was it really?

Christian, thank you for your input. Do you think this leads to a settlement? it certainly affects the fhfa/treasury negotiation. if you guys read the opinion, which I encourage, check out the text to footnotes 178-180 So they cite Calabria himself huh? Interesting.

Am I missing where relief is discussed? If the relief is prospective does that mean as much if the NWS was going to be stopped soon anyway?

This is why a great trader said, the best analysts are sometimes the worst traders. Who here is trading?

I think thats pretty obvious to those who have a level of understanding that I think many of us have here. Fast money leaving again.

Agree, I think full focus should be shifted to Calabria and his past comments regarding recap, time frame to negotiate the PSPA and IPO/offering. Looking at it now were those involved expecting too much from Treasury? This is FHFA/Calabrias baby now. Treasury said go ahead do your thing.

As frustrating as the media can be, I always remind myself that fear and worry created by headlines is largely responsible for where I am today. It helps a ton on entry price and is irrelevant once you're already invested if you have the right mindset and temperament. I know and believe me I get that. I just have to give Parrott and those guys a lot of credit. I would have run off and would be hiding in the hills switching the focus of my consulting business. There must have been a big fat prize at the end of the rainbow for him to still give a shit at this point with where things are going. They tried very hard to kill FnF and came very close but what blows my mind is they are still trying, they are some persistent bastards.

No shit. Even quoting irrelevants like Jim Parrott, really? Jim Parrott? They just cant bring themselves to just take the side of shareholders. Those losing the grip are trying anything to scare off shareholders. All the stuff that those dick heads were wrong about and now they warn about the "wait" oh the horror! LOL. Next will be comments about the NWS and how it isnt enough, then the FHFA capital levels and how bad those are, then the recap plan may not be favorable for shareholders yada yada. We went from salting the earth with FNF to having to wait to "mint riches" and those dick heads are "warning" about it. Unbelievable. https://www.bloomberg.com/news/articles/2019-09-06/fannie-freddie-bulls-might-need-trump-win-in-2020-to-mint-riches

Calabria certainly in focus now and a nice reminder that he said negotiations would be in the time frame we are in right now. Place your bets on whether Q3 earnings are swept.

Who cares if congress complains. There is nothing they can do to stop the recap and FHFA moving forward. Let them complain all they want.