Guest cherzeca Posted May 6, 2020 Share Posted May 6, 2020 One fund is looking to raise $100,000,000 to buy junior prefs https://www.hfalert.com/search.pl?ARTICLE=189387 really strange. the GSEs are in the "too hard pile' for many investors, but I guess there is a safety in numbers if you invest through a fund with a PM in effect holding your hand...which I assume you are paying for with a 2/20 Link to comment Share on other sites More sharing options...
orthopa Posted May 6, 2020 Share Posted May 6, 2020 One fund is looking to raise $100,000,000 to buy junior prefs https://www.hfalert.com/search.pl?ARTICLE=189387 As cherzeca said not sure why someone who was willing to contribute to 100 million dollar fund wouldn't just buy the preferred on their own and save the management fee. That being said 2/20 maybe a small price to pay if your unfamiliar with the story/possible outcomes and probabilities and don't want to put the time in to learn it all on your own. If things go the way we think they will that an easy 2/20 for them. Link to comment Share on other sites More sharing options...
Midas79 Posted May 6, 2020 Share Posted May 6, 2020 One fund is looking to raise $100,000,000 to buy junior prefs https://www.hfalert.com/search.pl?ARTICLE=189387 As cherzeca said not sure why someone who was willing to contribute to 100 million dollar fund wouldn't just buy the preferred on their own and save the management fee. That being said 2/20 maybe a small price to pay if your unfamiliar with the story/possible outcomes and probabilities and don't want to put the time in to learn it all on your own. If things go the way we think they will that an easy 2/20 for them. I don't see a meaningful threshold in required learning between buying prefs oneself or investing in a fund that's going to buy them. Just a strange story all around. If it ends up lacking credibility it could actually be a pump-and-dump. I assume that this fund will buy mostly if not all FNMAS and FMCKJ (maybe FNMAT) because the other series just don't have the liquidity to deploy $100M in any reasonable timeframe, and the other series stand to gain more than 200% if they hit par. Even FNMAS and FMCKJ will make more than 200% in a return to par, but the 2/20 might account for it coming out at 200% in the end. Monday was a good day for the prefs but nowhere close to $100M in volume. Only around $11M for FNMAS and $4M for FMCKJ. Either that's when this fund decided to deploy some of their money (a rumor I saw said that they had already raised $20M) or someone else decided to pile into FNMAS. Link to comment Share on other sites More sharing options...
orthopa Posted May 6, 2020 Share Posted May 6, 2020 One fund is looking to raise $100,000,000 to buy junior prefs https://www.hfalert.com/search.pl?ARTICLE=189387 As cherzeca said not sure why someone who was willing to contribute to 100 million dollar fund wouldn't just buy the preferred on their own and save the management fee. That being said 2/20 maybe a small price to pay if your unfamiliar with the story/possible outcomes and probabilities and don't want to put the time in to learn it all on your own. If things go the way we think they will that an easy 2/20 for them. I don't see a meaningful threshold in required learning between buying prefs oneself or investing in a fund that's going to buy them. Just a strange story all around. If it ends up lacking credibility it could actually be a pump-and-dump. I assume that this fund will buy mostly if not all FNMAS and FMCKJ (maybe FNMAT) because the other series just don't have the liquidity to deploy $100M in any reasonable timeframe, and the other series stand to gain more than 200% if they hit par. Even FNMAS and FMCKJ will make more than 200% in a return to par, but the 2/20 might account for it coming out at 200% in the end. Monday was a good day for the prefs but nowhere close to $100M in volume. Only around $11M for FNMAS and $4M for FMCKJ. Either that's when this fund decided to deploy some of their money (a rumor I saw said that they had already raised $20M) or someone else decided to pile into FNMAS. Yeah there has been some interest lately and some of the lower yielding divs playing catch up a bit. Still >20% difference between FNMAS and some of the lower yielders. Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 7, 2020 Share Posted May 7, 2020 One fund is looking to raise $100,000,000 to buy junior prefs https://www.hfalert.com/search.pl?ARTICLE=189387 As cherzeca said not sure why someone who was willing to contribute to 100 million dollar fund wouldn't just buy the preferred on their own and save the management fee. That being said 2/20 maybe a small price to pay if your unfamiliar with the story/possible outcomes and probabilities and don't want to put the time in to learn it all on your own. If things go the way we think they will that an easy 2/20 for them. I don't see a meaningful threshold in required learning between buying prefs oneself or investing in a fund that's going to buy them. Just a strange story all around. If it ends up lacking credibility it could actually be a pump-and-dump. I assume that this fund will buy mostly if not all FNMAS and FMCKJ (maybe FNMAT) because the other series just don't have the liquidity to deploy $100M in any reasonable timeframe, and the other series stand to gain more than 200% if they hit par. Even FNMAS and FMCKJ will make more than 200% in a return to par, but the 2/20 might account for it coming out at 200% in the end. Monday was a good day for the prefs but nowhere close to $100M in volume. Only around $11M for FNMAS and $4M for FMCKJ. Either that's when this fund decided to deploy some of their money (a rumor I saw said that they had already raised $20M) or someone else decided to pile into FNMAS. LOL, ya think? I take that back. It could be that whoever wrote it is just sick and tired of seeing his holdings wallowing in 4-5x land. Whatever is the truth, that was definitely a pump report. Link to comment Share on other sites More sharing options...
beaufort Posted May 7, 2020 Share Posted May 7, 2020 Re Fannie Q1 earnings. There is a significant difference in cash on the balance sheet that changed from December 31, 2019 to March 31, 2020. The change in cash is from $21,184 to $80,463 (difference of $59,279) and total assets are up to $3,601,356 up from $3,503,319 (difference of $98,037). There is a corresponding significant change in total liabilities from $3,587,411 up from $3,488,711 (difference of $98,700). The net difference between total liabilities and total assets is nearly a wash, but why did Fannie raise so much cash? Page 11: https://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2020/q12020_release.pdf On the conference call the CFO mentioned selling bonds to finance the P and I advancements after 4 months for the loans on forbearance? Did they raise cash for this? I read the conference call transcript. Your explanation is consistent with the documents and the call. Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 7, 2020 Share Posted May 7, 2020 Learn deep into this crisis, you must watch it https://youtu.be/7B8qJbKwx_o?t=619 https://youtu.be/7B8qJbKwx_o?t=885 https://www.youtube.com/watch?v=7B8qJbKwx_o It's been banned for good reason, Emily. https://www.bitchute.com/video/T6ByOc9NOgW9/ Link to comment Share on other sites More sharing options...
investorG Posted May 8, 2020 Share Posted May 8, 2020 Another week goes by of Mnuchin and Calabria unnecessarily hurting their boss's re-election odds through artificially creating a tight mortgage market. It's time for them to settle Collins (which would domino end the rest of the lawsuits) and at the same time co-ordinate a private equity injection into the companies so they can spread the wealth to homeowners with a strong balance sheet. Waiting for 7 weeks for the Seila outcome is wasting valuable time. Link to comment Share on other sites More sharing options...
Guest cherzeca Posted May 8, 2020 Share Posted May 8, 2020 Another week goes by of Mnuchin and Calabria unnecessarily hurting their boss's re-election odds through artificially creating a tight mortgage market. It's time for them to settle Collins (which would domino end the rest of the lawsuits) and at the same time co-ordinate a private equity injection into the companies so they can spread the wealth to homeowners with a strong balance sheet. Waiting for 7 weeks for the Seila outcome is wasting valuable time. some PE is already in the GSEs...owning the juniors looking for a settlement before even considering adding on. most PE has no interest, looking to take control over companies, cut costs then monetize. your oft-recurring PE refrain is apparently heartfelt on your part, but I would suggest a complete waste of time at this juncture. Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 8, 2020 Share Posted May 8, 2020 On ASK there is now a $2.11 difference between FMCKN and FNMAS. Man, I don't know what people are thinking; Cheapest 4 are all Freddie, like it will matter in end. Spent morning flipping FNMAH for FMCKM and FNMAT for a gain of around 10%. Thanks! Link to comment Share on other sites More sharing options...
Luke 532 Posted May 8, 2020 Share Posted May 8, 2020 On ASK there is now a $2.11 difference between FMCKN and FNMAS. Man, I don't know what people are thinking; Cheapest 4 are all Freddie, like it will matter in end. Spent morning flipping FNMAH for FMCKM and FNMAT for a gain of around 10%. Thanks! I used to think the same thing, but I've changed my opinion. I previously owned FMCCL but switched to the more expensive (based on percentage of par) FNMAH about 6 months ago. Currently, I own FNMAH and FNMFN in roughly equal dollar amounts. I'm not necessarily saying any of the following are going to happen, but the real possibility is enough to at least think twice (especially points 1 and 2 below). My reasons for changing my opinion are below... (1) If nothing was done other than turning on the dividends for lower dividend prefs, like FMCCL with it's 1.54% coupon, where do you think they'd trade in relation to par? Let's say the yield is 4%, that puts the price of FMCCL at $20 (40% of par). That would be awful if an investor is expecting at or near par. (2) There has been talk of converting at 60% of par plus back-interest paid for 6 years. Yes, I'm aware they are non-cumulative but anything can happen in a negotiated settlement. FMCCL (1.54%): ($50 * 60%) + (1.54% * $50 * 6 years) = $34.62/share... or 69.2% of par. FNMAH (4.5%): ($25 * 60%) + (4.5% * $25 * 6 years) = $21.75/share... or 87% of par. FNMFN (7%): ($50 * 60%) + (7% * $50 * 6 years) = $51.00/share... or 102% of par. (3) Fannie is expected to exit conservatorship via consent decree up to 6 months before Freddie exits because they have more capital built up. Therefore, people might be more willing to buy Fannie prefs. (4) Some investors don't want to switch back and forth within the preferred issues due to long-term capital gains tax status. It's a tough pill to swallow to start that year-long clock over again. Link to comment Share on other sites More sharing options...
Luke 532 Posted May 8, 2020 Share Posted May 8, 2020 ^^^ With that said, I fully expect all series to be converted at/near par regardless of dividend rate. I just wanted to cover my backside in case any of the scenarios above play out. Those buying prefs based solely on discount to par, in all likelihood, will do best. Link to comment Share on other sites More sharing options...
Midas79 Posted May 8, 2020 Share Posted May 8, 2020 On ASK there is now a $2.11 difference between FMCKN and FNMAS. Man, I don't know what people are thinking; Cheapest 4 are all Freddie, like it will matter in end. Spent morning flipping FNMAH for FMCKM and FNMAT for a gain of around 10%. Thanks! I used to think the same thing, but I've changed my opinion. I previously owned FMCCL but switched to the more expensive (based on percentage of par) FNMAH about 6 months ago. Currently, I own FNMAH and FNMFN in roughly equal dollar amounts. I'm not necessarily saying any of the following are going to happen, but the real possibility is enough to at least think twice (especially points 1 and 2 below). My reasons for changing my opinion are below... (1) If nothing was done other than turning on the dividends for lower dividend prefs, like FMCCL with it's 1.54% coupon, where do you think they'd trade in relation to par? Let's say the yield is 4%, that puts the price of FMCCL at $20 (40% of par). That would be awful if an investor is expecting at or near par. (2) There has been talk of converting at 60% of par plus back-interest paid for 6 years. Yes, I'm aware they are non-cumulative but anything can happen in a negotiated settlement. FMCCL (1.54%): ($50 * 60%) + (1.54% * $50 * 6 years) = $34.62/share... or 69.2% of par. FNMAH (4.5%): ($25 * 60%) + (4.5% * $25 * 6 years) = $21.75/share... or 87% of par. FNMFN (7%): ($50 * 60%) + (7% * $50 * 6 years) = $51.00/share... or 102% of par. (3) Fannie is expected to exit conservatorship via consent decree up to 6 months before Freddie exits because they have more capital built up. Therefore, people might be more willing to buy Fannie prefs. (4) Some investors don't want to switch back and forth within the preferred issues due to long-term capital gains tax status. It's a tough pill to swallow to start that year-long clock over again. Good points, particularly 2 and 4. That said, why would you own FNMAH (variable div, 4.5% right now) over FNMAJ (7.675% fixed div) right now when you could trade the former for the latter at parity? I just checked: the bid on FNMAH and the ask on FNMAJ are both at $6.15. Link to comment Share on other sites More sharing options...
Luke 532 Posted May 8, 2020 Share Posted May 8, 2020 Good points, particularly 2 and 4. That said, why would you own FNMAH (variable div, 4.5% right now) over FNMAJ (7.675% fixed div) right now when you could trade the former for the latter at parity? I just checked: the bid on FNMAH and the ask on FNMAJ are both at $6.15. Very interesting, thanks. Gonna run some numbers... Link to comment Share on other sites More sharing options...
beaufort Posted May 8, 2020 Share Posted May 8, 2020 I know this has come up before, but what would the rationale be for converting the low yielders in today's environment? Reissuing new prefs will be more expensive to the companies. The only thing I can think of is to clear the capital structure completely to raise new common with nothing ahead of the new money. For those more knowledgeable about this than me, please provide some colour on this. For example, I have not looked at whether C had low yielders such as FMCCL and if something similar happened in that recap. Would clearing up the capital structure be such an advantage that it would prevail over keeping the payouts cheap? Link to comment Share on other sites More sharing options...
Guest cherzeca Posted May 8, 2020 Share Posted May 8, 2020 there is no really smart way to play this imo since we dont know how any transaction/settlement will play out. I like liquidity, so I am in most liquid pref security I could find Link to comment Share on other sites More sharing options...
Midas79 Posted May 8, 2020 Share Posted May 8, 2020 there is no really smart way to play this imo since we dont know how any transaction/settlement will play out. I like liquidity, so I am in most liquid pref security I could find Doesn't liquidity only matter if you want to get in or out quickly? If so, what event(s) would make you want to run to the exit? Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 8, 2020 Share Posted May 8, 2020 On ASK there is now a $2.11 difference between FMCKN and FNMAS. Man, I don't know what people are thinking; Cheapest 4 are all Freddie, like it will matter in end. Spent morning flipping FNMAH for FMCKM and FNMAT for a gain of around 10%. Thanks! I used to think the same thing, but I've changed my opinion. I previously owned FMCCL but switched to the more expensive (based on percentage of par) FNMAH about 6 months ago. Currently, I own FNMAH and FNMFN in roughly equal dollar amounts. I'm not necessarily saying any of the following are going to happen, but the real possibility is enough to at least think twice (especially points 1 and 2 below). My reasons for changing my opinion are below... (1) If nothing was done other than turning on the dividends for lower dividend prefs, like FMCCL with it's 1.54% coupon, where do you think they'd trade in relation to par? Let's say the yield is 4%, that puts the price of FMCCL at $20 (40% of par). That would be awful if an investor is expecting at or near par. (2) There has been talk of converting at 60% of par plus back-interest paid for 6 years. Yes, I'm aware they are non-cumulative but anything can happen in a negotiated settlement. FMCCL (1.54%): ($50 * 60%) + (1.54% * $50 * 6 years) = $34.62/share... or 69.2% of par. FNMAH (4.5%): ($25 * 60%) + (4.5% * $25 * 6 years) = $21.75/share... or 87% of par. FNMFN (7%): ($50 * 60%) + (7% * $50 * 6 years) = $51.00/share... or 102% of par. (3) Fannie is expected to exit conservatorship via consent decree up to 6 months before Freddie exits because they have more capital built up. Therefore, people might be more willing to buy Fannie prefs. (4) Some investors don't want to switch back and forth within the preferred issues due to long-term capital gains tax status. It's a tough pill to swallow to start that year-long clock over again. All good points that I've considered but your 2nd post weighs heavier in my mind. There's also a (5), though. I read it here and it makes as much sense as your (3) - Fannie having more value does have merit. But (5) is how it wouldn't be dumb for the low dividend issues to not be part of a settlement and just be set free (not sure who wrote that but I thought it smart). So, which would you rather own, FNMAS at $25, period, or FNMAH at $20 and a $20 yearly dividend? Another consideration: today I traded FNMAH at 4x ($25) partially for FNMAP at 5.3x ($50). For those of us holding for settlement those 50's deserve more respect. NM, (5) is (1) Link to comment Share on other sites More sharing options...
Guest cherzeca Posted May 8, 2020 Share Posted May 8, 2020 there is no really smart way to play this imo since we dont know how any transaction/settlement will play out. I like liquidity, so I am in most liquid pref security I could find Doesn't liquidity only matter if you want to get in or out quickly? If so, what event(s) would make you want to run to the exit? maybe something good, maybe something bad Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 8, 2020 Share Posted May 8, 2020 Good points, particularly 2 and 4. That said, why would you own FNMAH (variable div, 4.5% right now) over FNMAJ (7.675% fixed div) right now when you could trade the former for the latter at parity? I just checked: the bid on FNMAH and the ask on FNMAJ are both at $6.15. That's not true. FNMAH's dividend is the higher of 4.5% or LIBOR + .75% Although, Luke's 2nd post..... it's unlikely any dividend is maintained. Link to comment Share on other sites More sharing options...
Luke 532 Posted May 8, 2020 Share Posted May 8, 2020 From Peter A. Chapman... Under seal this afternoon, Chief Judge Sweeney entered her opinion and order on the government's motion to dismiss the Fisher and Reid Plaintiffs' complaints. The court docket indicates Judge Sweeney denied the government's motion to dismiss and denied the Fisher and Reid Plaintiffs' motion to lift the stay. The court docket also indicates any motion to certify an interlocutory appeal to the Federal Circuit must be filed by May 118. Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 9, 2020 Share Posted May 9, 2020 From Peter A. Chapman... Under seal this afternoon, Chief Judge Sweeney entered her opinion and order on the government's motion to dismiss the Fisher and Reid Plaintiffs' complaints. The court docket indicates Judge Sweeney denied the government's motion to dismiss and denied the Fisher and Reid Plaintiffs' motion to lift the stay. The court docket also indicates any motion to certify an interlocutory appeal to the Federal Circuit must be filed by May 118. What does the following mean: "denied the Fisher and Reid Plaintiffs' motion to lift the stay"? What motion would FnR be staying? Answer: (more waiting) "Fisher/Reid claims are derivative (like Barrett's in Fairholme, et al). Judge Sweeney's order seems to force Fisher/Reid to (1) wait for Fairholme, et al decision from Court of Appeals or (2) make their own motion to certify interlocutory appeal." Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 10, 2020 Share Posted May 10, 2020 Someone bought over 10 million common shares? https://money.cnn.com/quote/shareholders/shareholders.html?symb=FNMA&subView=institutional Someone did! Looks like their 200+ million shares of FnF were built since 4th qtr. They also own 144 million shares of various preferreds. Good catch, both are very substantial positions! "Courage! We have been here before" https://www.capitalgroup.com/ Link to comment Share on other sites More sharing options...
investorG Posted May 10, 2020 Share Posted May 10, 2020 I wonder when we'll get the wsj / bloomberg / politico article talking about another delayed capital rule release. Link to comment Share on other sites More sharing options...
Guest Covid-19_Survivor Posted May 12, 2020 Share Posted May 12, 2020 Someone bought over 10 million common shares? https://money.cnn.com/quote/shareholders/shareholders.html?symb=FNMA&subView=institutional Someone did! Looks like their 200+ million shares of FnF were built since 4th qtr. They also own 144 million shares of various preferreds. Good catch, both are very substantial positions! "Courage! We have been here before" https://www.capitalgroup.com/ Accumulation occurring, and mostly with this firms favs. I suspect they're still building positions. Either that or others respect their opinion that we're going whole - one way or another. Expect a puff report in near future. Link to comment Share on other sites More sharing options...
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