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

[hardincap]

im alot less concerned about perry now. takings case will continue, and with a "friendly" treasury sec this seems to be heading towards settlement

[merkhet]

im alot less concerned about perry now. takings case will continue, and with a "friendly" treasury sec this seems to be heading towards settlement

 

I have to imagine that Berkowitz et. al. are already in communication with Mnuchin. If not before today then certainly after...

[hardincap]

probably more like paulson and mnuchin. they've worked together before on indymac, and paulson is the biggest holder of freddie

[Guest wellmont]

I am certain the largest holder of fannie and freddie common stock outside of the us gov is going to have a seat at the head of the table. He basically has already published a blueprint to get a restructuring done quickly. And notice the word the new treas sec used: "restructured".

[merkhet]

probably more like paulson and mnuchin. they've worked together before on indymac, and paulson is the biggest holder of freddie

 

http://www.wsj.com/articles/what-treasury-nominee-steven-mnuchin-means-for-the-mortgage-market-1480539516?mg=id-wsj

 

Yup. Paulson was on the board of Indymac. You beat me to it.

[Mephistopheles]

Which set of filings for Paulson shows his position? He has like 20 different reporting companies and the only 13Fs I found don't show the holdings.

[Guest cherzeca]

So mnuchin knows Paulson and berkowitz well, and government's warrant financial position is aligned with Pershing capital. Looks to me like a doable settlement

[Mephistopheles]

As far as common vs. preferred. The common, being the most liquid, is easiest to build a large position in. While Berk and Paulson own the preferred - assuming they dramatically bumped their position since the election, it must have had to involve the common. Icahn owns the common as well.

 

I highly doubt the solution, whatever it may be, will be terribly dilutive for the common. They will use the excess dividends as a repayment of capital, but may go further by reversing the 10% dividend for all the repayment after it happened, retroactively. So if they repaid $100 billion in 2013; then the dividend thereafter should only be on the remaining $88 billion, and I bet they adjust for that too. The really remote but very lucrative possibility for the common is they do away with the warrants altogether.

 

Point being, rather than benefit the junior preferred at the expense of the common, why not benefit the jr pref AND common at the expense of the senior preferred? That's exactly what I'd want if I were Paulson/Berkowitz/Icahn.

[Philip Morris IV]

Which set of filings for Paulson shows his position? He has like 20 different reporting companies and the only 13Fs I found don't show the holdings.

 

Not that I've checked, but it's not likely they appear in any of his filings as they are not 13-F securities.  It is for this reason they also do not show on Fairholme's 13F.

[BeerBBQ]

So mnuchin knows Paulson and berkowitz well, and government's warrant financial position is aligned with Pershing capital. Looks to me like a doable settlement

 

can you please elaborate on what you mean by government's warrant financial positon is aligned with Pershing Capital?  Also, in terms of settlement, how does Washington Federal play into that considering that case is challenging the warrants too?

 

[Guest cherzeca]

So mnuchin knows Paulson and berkowitz well, and government's warrant financial position is aligned with Pershing capital. Looks to me like a doable settlement

 

can you please elaborate on what you mean by government's warrant financial positon is aligned with Pershing Capital?  Also, in terms of settlement, how does Washington Federal play into that considering that case is challenging the warrants too?

 

Pershing owns common

 

Wash fed has been sitting on the bench using a class action firm that doesn't want to do anything where it won't get a class payout

 

In other words no seat at settlement table for wash fed

[Mephistopheles]

Which set of filings for Paulson shows his position? He has like 20 different reporting companies and the only 13Fs I found don't show the holdings.

 

Not that I've checked, but it's not likely they appear in any of his filings as they are not 13-F securities.  It is for this reason they also do not show on Fairholme's 13F.

 

That's what I thought, but someone mentioned how he's the largest owner of Freddie so I figured it's public. Maybe it's from previous filings? I know Fairholme did away with it but then started showing them again in filings...

[waynepolsonAtoZ]

"In other words no seat at settlement table for wash fed"

 

True. Years down the road, there may be a settlement in Judge Sweeney's court, but that's not very relevant in the near term.

 

God only knows, Lamberth's successor on the Cobell v Salazar case was extremely eager that the parties settle (which they did a couple years ago). He wanted to avoid getting into the same situation as Lamberth.

 

Wouldn't be too surprising (to me) if Judge Sweeney or her successor is someday interested in a settlement too.

[merkhet]

Which set of filings for Paulson shows his position? He has like 20 different reporting companies and the only 13Fs I found don't show the holdings.

 

Not that I've checked, but it's not likely they appear in any of his filings as they are not 13-F securities.  It is for this reason they also do not show on Fairholme's 13F.

 

That's what I thought, but someone mentioned how he's the largest owner of Freddie so I figured it's public. Maybe it's from previous filings? I know Fairholme did away with it but then started showing them again in filings...

 

Paulson is in the preferreds. I was fortunate enough to get a meeting with him back in February 2014. He said that it was the firm's largest position (though I'm unclear whether that's largest within a single fund or across all funds).

 

And I have no idea where you guys are getting the idea that Paulson or Berkowitz have added (common or preferreds) since the election. Is this out there somewhere or is it conjecture?

[Guest wellmont]

the common also have voting rights. the non cum pref do not, from my reading. They have a right to receive a fixed dividend at the BOD's discretion, and a liquidation preference. Since it's clear this is no longer a liquidation scenario, it seems to me the common shareholders (us gov and other large holders), will be driving the restructuring.

[Mephistopheles]

Which set of filings for Paulson shows his position? He has like 20 different reporting companies and the only 13Fs I found don't show the holdings.

 

Not that I've checked, but it's not likely they appear in any of his filings as they are not 13-F securities.  It is for this reason they also do not show on Fairholme's 13F.

 

That's what I thought, but someone mentioned how he's the largest owner of Freddie so I figured it's public. Maybe it's from previous filings? I know Fairholme did away with it but then started showing them again in filings...

 

Paulson is in the preferreds. I was fortunate enough to get a meeting with him back in February 2014. He said that it was the firm's largest position (though I'm unclear whether that's largest within a single fund or across all funds).

 

And I have no idea where you guys are getting the idea that Paulson or Berkowitz have added (common or preferreds) since the election. Is this out there somewhere or is it conjecture?

 

It was just an example. But I mean in general, if you're managing billions of dollars, the common is easier to build/increase a significant position in. I can understand why they preferred the preferreds when their only hope was the Courts, as you've explained in regards to Takings or Contract law. But now they have muscle in the Executive branch, so why not use it to their advantage? Berkowitz definitely owns the common, so I just don't see him screwing that position over.

 

There are 3 classes: senior, junior, common...and I think it's the senior that'll be left holding the bag. Under Obama/Hillary, it might have been the common.

[hardincap]

berk sold out of commons, actually. bad timing, but i think he was forced to due to redemptions.

 

v interesting that paulson has prefs as his largest position. i didnt know it was that big.

 

 

[Mephistopheles]

berk sold out of commons, actually. bad timing, but i think he was forced to due to redemptions.

 

v interesting that paulson has prefs as his largest position. i didnt know it was that big.

 

 

 

Are you referring to the position he sold to Icahn? I know he bought back in after that.. but maybe he sold out again ?

[hardincap]

per latest fairholme investor docs, he has sold out of commons. he was pretty much forced to due to redemptions.

 

also, why do we keep assuming icahn still owns fannie? we only know he held it in 2014, pre lamberth.

[Mephistopheles]

Same reason we assume Paulson still owns it? lol

[merkhet]

berk sold out of commons, actually. bad timing, but i think he was forced to due to redemptions.

 

v interesting that paulson has prefs as his largest position. i didnt know it was that big.

 

 

 

Are you referring to the position he sold to Icahn? I know he bought back in after that.. but maybe he sold out again ?

 

If you refer to Fairholme's recent report from mid-year, they have zero exposure to the commons. (http://www.fairholmefundsinc.com/Reports/Funds2016SemiAnnual.pdf)

 

And yes, @hardincap, it was their largest position. Of course, this was almost three years ago, so things may have changed since then.

[hardincap]

Same reason we assume Paulson still owns it? lol

 

paulson cant liquidate his preferreds, he owns too much. icanh can easily liquidate his commons

[CorpRaider]

Congrats to you longs.  Think you will have to put up new capital in exchange for warrants/equity?  Seems like they will have to make you guys write a check in connection with recapitalizing it just for the optics of a GS alumn Treasury Secretary and a bunch of hedge fund buddies.

[TwoCitiesCapital]

the common also have voting rights. the non cum pref do not, from my reading. They have a right to receive a fixed dividend at the BOD's discretion, and a liquidation preference. Since it's clear this is no longer a liquidation scenario, it seems to me the common shareholders (us gov and other large holders), will be driving the restructuring.

 

Wouldn't it be the FHFA/Treasury driving the restructuring given that the plans will likely be laid out before they're released?

 

And if that's the case, it's going to be the FHFA/Treasury w/ Paulson/Berkowitz/Perry driving the restructuring since they're the ones with legal cases that would need to move forward/be settled before investors can more forward with any certainty in the common.

 

Still hoping for preferreds to be redeemed at par for common shares before the common rallies TOO much ::fingers crossed::

[Mephistopheles]

Congrats to you longs.  What is the AIG model?  Put up new capital in exchange for warrants?  Seems like they will have to make you guys write a check in connection with recapitalizing it just for the optics of a GS alumn Treasury Secretary and a bunch of hedge fund buddies.

 

I think if Trump gave two shits about optics, his cabinet wouldn't look anything like it does now. I would have bet a hell of a lot of money that we wouldn't see another GS guy in Treasury for a generation.