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

[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.

 

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::

 

that's a good point about the law suits. I continue to believe that they are going to hammer out a win win that is going to please whoever is involved here in whatever way they chose. :)

[TwoCitiesCapital]

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.

 

Lol!

 

+1

[doughishere]

Well Gentlemen. This trade seems to be about over. Merk, Cherz, Luke, Steve and any other of the legal eagles who have been posting for the last few years. And whoever else has been contributing to this thread that I forgot.

 

 

Thanks your insight is appreciated. You guys are the MVPs on here.

[TwoCitiesCapital]

Well Gentlemen. This trade seems to be about over. Merk, Cherz, Luke, Steve and any other of the legal eagles who have been posting for the last few years. And whoever else has been contributing to this thread that I forgot.

 

 

Thanks your insight is appreciated. You guys are the MVPs on here.

 

+1

 

I've made more $$$ the last 3 weeks off of this than any idea I ever came up with....so far. It was all largely due to the confidence and understanding I gained from everyone's contributions here.

 

 

[hardincap]

its not over till its over folks

[merkhet]

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.

 

I wouldn't be surprised to see rights offerings distributed to preferred/common.

 

its not over till its over folks

 

Agree. It's not over until I've heard from a fat lady. But the past few weeks have been a welcome change from the last two years. :)

[onyx1]

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.

 

I wouldn't be surprised to see rights offerings distributed to preferred/common.

 

its not over till its over folks

 

Agree. It's not over until I've heard from a fat lady. But the past few weeks have been a welcome change from the last two years. :)

 

Its been a wild five-year ride for me, with price swings anywhere from 18% to 500% of my cost basis.  Though I've never been so optimistic, my champagne remains in the fridge.

[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.

 

I wouldn't be surprised to see rights offerings distributed to preferred/common.

 

its not over till its over folks

 

Agree. It's not over until I've heard from a fat lady. But the past few weeks have been a welcome change from the last two years. :)

 

Yeah, that would probably be sufficient Kabuki.

[Seahug]

About 7% for me  :), all FNMAS. Was thinking selling half at 10 but not sure now.

 

AIG solution from my hazy memory, since i neglected to do anything there. feel free to correct on #s:

 

prefs at 8.9% + libor completely repaid

 

in addition 79.9% of equity (orig, dunno the final, maybe 80 or 90%) sold down in stages

 

Jprefs reinstated i think

 

[Guest cherzeca]

I would take a little off table but I wouldn't cash my chips just yet. Imho

[Seahug]

Merk, Cherz, Luke, Steve and any other of the legal eagles who have been posting for the last few years. And whoever else has been contributing to this thread that I forgot

 

Thanks your insight is appreciated. You guys are the MVPs on here.

 

I don't think this is over. But, same sentiments. Thanks sincerely for your work and willingness to share.

 

Should we add if the p's lose in the 2 appeals and price goes down a lot? Change in govt position is a big deal. Would it be easier to reach a settlement w p's if they lose because expectations are more manageable whereas govt will still want to settle to achieve their objective of privatization?

 

Or is that stupid?

 

 

[Mephistopheles]

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?

 

Just to go back to this. If we are all buying more based on Trump winning - then those who are in the loop must be doing so as well, unless it counts as inside info, which I don't think it does. What are the odds that Paulson/Berkowitz knew Mnuchkin's thoughts before we all found out this morning? Very high imo. Paulson was obviously in on it before even Mnuchkin was appointed, as an economic advisor. In fact I can't imagine them not buying hand over fist since the election.

[orthopa]

Any reason to not add more at this point? Both preferred and common both still below par value and projected diluted value for common.

 

Obviously reversal of current thought, momentum etc but can the future be any more clear then what Mnunchin said about privatization?

[Guest cherzeca]

So when mnuchin said this morning (moneyhoney's show) re GSE privatization that "we'll get it done relatively fast", did your ears perk up?  Did anyone else think that he may have already discussed the parameters of a settlement with Paulson berkowitz ackman?

[Seahug]

Any reason to not add more at this point?

 

My question also.

 

Will a settlement require congressional approval? Seems so. In which case, may still be a long way to go.

 

But maybe also it will be like opec, kick and scream, threaten, walk away but finally agree

[BTShine]

Did the NWS originally require congressional approval?  If not, can't one treasury secretary undo another's work?

 

[Guest cherzeca]

Settlement terms determine whether need congressional approval. Remember mnuchin said relatively fast

[merkhet]

Settlement terms determine whether need congressional approval. Remember mnuchin said relatively fast

 

Just to add to this, Congress really doesn't have much of a say in terms of approval. Think about it this way, HERA mandates that FHFA be in charge. In actuality, Treasury seems to be in charge. The only way to change this is to modify HERA. Corker tried to pass Jump Start and couldn't do it. He had to slip it into an omnibus spending bill that couldn't be voted down.

 

Really, all Treasury and FHFA would have to do is agree to modify the terms (Jump Start's language, IIRC, merely deals with selling, disposing, etc. of the senior preferred) of the senior preferred to pay out a zero dividend and wait out the 2018 deadline to call it paid. Alternatively, I've seen a Millstein & Co. presentation that says they should just spin out the company from under the senior preferred and leave the senior preferred as the top layer of a hollowed out shell.

 

Lots of options here. Almost all of which do not require Congressional approval.

 

Mainly I think Congress could try to screw shareholders by requiring very high capital ratios, but you could easily move aside from that by spinning them out to a new company and/or breaking them up to smaller companies so that no one cares. (i.e. the Berkowitz proposal)

 

What's really interesting to me is to look at the Berkowitz proposal in conjunction with some of the numbers that are thrown out in the Ackman proposal. If you're able to keep the cap rate at 5% or lower, and you get some favorable changes to the tax code (also a Mnuchin priority), then you can get a pretty decent ROE on top of which you can slap a multiple and get something higher than par.

 

But this is all speculation until we see what the restructuring looks like...

[hardincap]

If this is Paulsons top holding, you betcha he's is all over this right now. No way he wouldn't get involved in some major way, considering his close ties to mnuchin

[Guest cherzeca]

We can timestamp this

 

I think you will see fnma and fncc merged, attaining huge synergy savings, and a utility-like regulatory regime where rates and return on capital are subject to approval. Cf real Tim Howard

 

[onyx1]

So when mnuchin said this morning (moneyhoney's show) re GSE privatization that "we'll get it done relatively fast", did your ears perk up?  Did anyone else think that he may have already discussed the parameters of a settlement with Paulson berkowitz ackman?

 

I had the same reaction.

[orthopa]

So when mnuchin said this morning (moneyhoney's show) re GSE privatization that "we'll get it done relatively fast", did your ears perk up?  Did anyone else think that he may have already discussed the parameters of a settlement with Paulson berkowitz ackman?

 

You bet it will. Those guys want their money as fast as we do.  ;D ;D ;D

[hardincap]

http://finance.yahoo.com/news/fannie-and-freddies-fate-depends-on-whether-trump-goes-with-john-or-jeb-151811290.html

 

"Unfortunately, twists and turns in both the past and the present of the GSEs have always been dictated by political realities more than thoughtful policy. The safe bet is that the complicated mess of it all means that the next four years will be a continuation of the last eight:  Limbo for Fannie and Freddie"

 

important point to consider from an unbiased (and extremely thoughtful and intelligent) observer

[Shane]

Apologies if this is too basic, but what gives everyone so much confidence that the pref shareholders will have rights to dividends in the future?  Given that they already were essentially killed by the profit sweep, it seems there is a precedent set that their rights are no longer applicable post bail out.

 

My concern is that Mnunchin might give Fannie/Freddie back to the market, but that might not end up being a win for preferred shareholders.

[hardincap]

the speculation is that mnuchin is not going to screw over his ex investment partner Paulson. there is a clear win win scenario for investors and govt and mnuchin incentivized to pursue it (and also not boudn by idealogical bias). he also mentioned he wants to resolve this relatively fast.. this means the legal cases will have to be settled