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

[orthopa]

Gasparino mentions the heavy bond lobby but wouldn't their minds be eased with MORE capital in front of the gov and a paid for guarantee? Not sure why they would be against that after they leave conservatorship. The bond lobby could have lobbied for them to not leave conservatorship until more capitalized.

[typicalvalue]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

[SnarkyPuppy]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

I suspect this is a bit of an overly optimistic take and the most honest/appropriate assessment of the current situation given the reporting is that there will be a PSPA amendment, but it will ultimately only achieve a similar outcome as the Sept 2019 letter agreement.  There are good reasons why this may be wrong, but I unfortunately this has to be your base case at this point. 

 

Haven't sold any shares since, to your point, nothing specifically concrete has been reported.  But at this point you have to consider this as a very real possibility.

[Jcmeg35]

+1

[investorG]

At this point the pref shares could possibly be valued at NPV based on some expected chances of winning in Lamberth, where I read (but am not sure) that damages, if won, would be par + 6% a year from injury, or ~ $40 (for $25 par).  that trial is scheduled to start in 2022 and after appeals maybe 2025.

[orthopa]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

I suspect this is a bit of an overly optimistic take and the most honest/appropriate assessment of the current situation given the reporting is that there will be a PSPA amendment, but it will ultimately only achieve a similar outcome as the Sept 2019 letter agreement.  There are good reasons why this may be wrong, but I unfortunately this has to be your base case at this point. 

 

Haven't sold any shares since, to your point, nothing specifically concrete has been reported.  But at this point you have to consider this as a very real possibility.

 

No question and I think the market has priced this in at these prices. Im not sure what the purpose of this would be though outside of kicking the can. They should have just made the 2019 LA with bigger caps if this was the plan in the end and I dont know it meshes with gasparinos path out of conservatorship and Mnuchins raising 3rd party capital.

 

Both a path out and raising 3rd party capital have to deal with the Sr Preferred in some fashion. You cant have either without. A thought I had was a 1:1 paydown of Sr preferred with capital raised, essentially an exchange once in a subordinate fashion I guess which fits with what WB_82 has said.

 

Granted we have multiple sources with differing agendas and different terms but you are correct a LA is base case. What a waste of time this was for all involved. Would Calabria even sign on to that tho? Is he following the law if he does that? I guess kind of.

[orthopa]

Gasparinos tweet also if word for word from source says "its unclear if it will write down what shareholders owe to treasury". Well thats the key part dummy! Since when do shareholders owe treasury, and "more"!!! on top of what the Treasury has sweeped already WITH an increased liquidation preference from the 2019 LA? My dear god. Thats unbelievable. Even more so in the specter that they would then get paid a back up fee if released.

[beaufort]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

I suspect this is a bit of an overly optimistic take and the most honest/appropriate assessment of the current situation given the reporting is that there will be a PSPA amendment, but it will ultimately only achieve a similar outcome as the Sept 2019 letter agreement.  There are good reasons why this may be wrong, but I unfortunately this has to be your base case at this point. 

 

Haven't sold any shares since, to your point, nothing specifically concrete has been reported.  But at this point you have to consider this as a very real possibility.

 

No question and I think the market has priced this in at these prices. Im not sure what the purpose of this would be though outside of kicking the can. They should have just made the 2019 LA with bigger caps if this was the plan in the end and I dont know it meshes with gasparinos path out of conservatorship and Mnuchins raising 3rd party capital.

 

Both a path out and raising 3rd party capital have to deal with the Sr Preferred in some fashion. You cant have either without. A thought I had was a 1:1 paydown of Sr preferred with capital raised, essentially an exchange once in a subordinate fashion I guess which fits with what WB_82 has said.

 

Granted we have multiple sources with differing agendas and different terms but you are correct a LA is base case. What a waste of time this was for all involved. Would Calabria even sign on to that tho? Is he following the law if he does that? I guess kind of.

 

I agree with Snarky and Orthopa. 

[beaufort]

At this point the pref shares could possibly be valued at NPV based on some expected chances of winning in Lamberth, where I read (but am not sure) that damages, if won, would be par + 6% a year from injury, or ~ $40 (for $25 par).  that trial is scheduled to start in 2022 and after appeals maybe 2025.

 

Yep and the expropriation claim.  Not sure on timeline for that one ie. if it's been set down for trial. 

 

We need a trial date.  I recall Holdenwalker saying 500 until trial for Lamberth.  Not sure about accuracy.  Expert evidence is due 90 days before trial.  Don't expect settlement until all of the evidence is in. 

 

We still have our MOS, but it will be a pretty terrible outcome if there isn't admin reform in the short term, for example, today.

[investorG]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

we might get the wb82 5-10 year plan (with kicker if Tsy forced to send $125bn back post-Collins).

[investorG]

At this point the pref shares could possibly be valued at NPV based on some expected chances of winning in Lamberth, where I read (but am not sure) that damages, if won, would be par + 6% a year from injury, or ~ $40 (for $25 par).  that trial is scheduled to start in 2022 and after appeals maybe 2025.

 

Yep and the expropriation claim.  Not sure on timeline for that one ie. if it's been set down for trial. 

 

We need a trial date.  I recall Holdenwalker saying 500 until trial for Lamberth.  Not sure about accuracy.  Expert evidence is due 90 days before trial.  Don't expect settlement until all of the evidence is in. 

 

We still have our MOS, but it will be a pretty terrible outcome if there isn't admin reform in the short term, for example, today.

 

scheduled for summer 2022. and I assume 3 years for appeals.  the sweeney / schwartz case is out there too but it appears bogged down in some sort of appeals.

[Guest cherzeca]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

[SnarkyPuppy]

LOL @ the legal path

[orthopa]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

[investorG]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

 

He merely said it simplifies things.

[COBFInfinity]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

 

He merely said it simplifies things.

 

As in, he expects all plaintiffs will throw in the towel on all lawsuits.

[investorG]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

 

He merely said it simplifies things.

 

As in, he expects all plaintiffs will throw in the towel on all lawsuits.

 

no, why we would we trade in lamberth?  It's $40 potential.  Ideally we'd settle that at some point in future for some value.  Like an earlier conversion to common or even better some ratio of paydowns as capital is built -- half sr pref half jr pref.

[COBFInfinity]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

 

He merely said it simplifies things.

 

As in, he expects all plaintiffs will throw in the towel on all lawsuits.

 

no, why we would we trade in lamberth?  It's $40 potential.  Ideally we'd settle that at some point in future for some value.  Like an earlier conversion to common or even better some ratio of paydowns as capital is built -- half sr pref half jr pref.

 

Because plaintiffs have the weak hand. The upcoming Treasury is never going to settle on fair terms, preferring to just let the lawsuits play out over many more years. Depending on what the PSPA amendment consists of (i.e., whether it would allow for a capital raise if not for the lawsuits), I actually think there's a possibility that preferred shareholder plaintiffs will be incentivized to drop all lawsuits quickly in order to allow for a recap to occur. That would be bad for common shareholders, but preferreds likely get paid off much faster in that scenario. But again, it will all depend on the details in the agreement...

[investorG]

In a going concern (i.e. non receivership) scenario, is the amount needed to "retire" the Sr pref the $194bn currently on b/s or the higher liquidation preference (220bn+) which still builds under the letter agreements?    the bloomberg article cited the latter but I view it as the former (outside of receivership).  If I'm correct then the letter agreements are not an accounting gimmick but rather actual capital raised, once again assuming they are going concerns.

[WB_fan82]

The liquidation preference isn't just an academic thing in receivership.  It's the same as increasing the principal outstanding on a loan. 

 

If the div was amended back to some fixed rate, it would be applied to the liquidation preference.

 

The letter agreements are not currently raising "actual capital" from the viewpoint of any junior equity holders.  That's why the common has done nothing as the GSEs have "retained" $20B.

 

I predicted the NWS stays in place but they go non-cumulative.  That would truly raise capital (And also get rid of this blockade of external capital) over time.

[SnarkyPuppy]

The liquidation preference isn't just an academic thing in receivership.  It's the same as increasing the principal outstanding on a loan. 

 

If the div was amended back to some fixed rate, it would be applied to the liquidation preference.

 

The letter agreements are not currently raising "actual capital" from the viewpoint of any junior equity holders.  That's why the common has done nothing as the GSEs have "retained" $20B.

 

I predicted the NWS stays in place but they go non-cumulative.  That would truly raise capital (And also get rid of this blockade of external capital) over time.

 

I actually think the current rumored reporting is consistent with a lot of what you have been predicting.  We'll see.  Mnuchin probably browses this thread and is stealing your idea - hence the last minute change.  Mnuchin = emily?

[Guest cherzeca]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

 

ending litigation, in his warped mind, makes it easier to raise money. he assumes that trashing existing shareholders is no impediment to finding new shareholders

[investorG]

The liquidation preference isn't just an academic thing in receivership.  It's the same as increasing the principal outstanding on a loan. 

 

If the div was amended back to some fixed rate, it would be applied to the liquidation preference.

 

The letter agreements are not currently raising "actual capital" from the viewpoint of any junior equity holders.  That's why the common has done nothing as the GSEs have "retained" $20B.

 

I predicted the NWS stays in place but they go non-cumulative.  That would truly raise capital (And also get rid of this blockade of external capital) over time.

 

Do you have any links to support the view that div would be based on liq preference?  I'm not saying you're wrong just that your view is inconsistent with what I've read.  They also use the book amount not liq pref in the core capital analysis in 10k's. 

 

edit: regarding common not appreciating, it could be due to expected dilution with anywhere from 100-300bn needing to be raised.

[orthopa]

Looks like after close is the time per Gasparino. 2 weeks ago we were told there wouldn't be a PSPA agreement and not enough time to get anything done before Biden gets in. Now we are told there is a plan (surprise!) but its a pathway out of conservatorship that will not benefit common/preferred shareholders whatever that means.  As of yesterday treatment of the Sr Preferred up for debate at the WH but per Gasparino to not expect much. Honestly sounds like no one knows anything concrete but we will all find out soon enough.

 

+1 and if there is a pathway out of conservatorship how on earth SPdfs are not dealt? I think we are just getting nuked with pieces of misinformation.

 

My best gin waiting in the fridge in case we have a happy ending LOL

 

I suppose Mnuchin's pathway is to simply raise the retained earnings cap by another letter agreement.  all hat no cattle for that putz.

 

three or so months to wait for SCOTUS. I think we get good news on APA claim (and maybe const claim, though justices were squirming around on that). APA claim would go to summary judgment motion hopefully by summer, but god knows when decided by fed d ct

 

cherzeca how does mnuchins comments that if SCOTUS rules for gov it would be easier to raise 3rd party capital? Rules for gov outright? NWS illegal but no damages? Whats your read on that?

 

ending litigation, in his warped mind, makes it easier to raise money. he assumes that trashing existing shareholders is no impediment to finding new shareholders

 

That part I guess I get but I guess my thought or point is regardless of what the SCOTUS decides if FnF are not in a position to raise capital a ruling does not make anything easier or harder. Assumed as Sr not written down or dealt with and not on CD (in conservatorship) what does it even matter what the SCOTUS rules? Rule against gov and doesnt matter as SCOTUS cannot take the companies out of conservatorship. Mnuchins comment I believe implies that even if you screw old shareholders, they have to be in a position to even court new shareholders. This coming amendment has to make a SCOTUS ruling matter.

[Midas79]

ending litigation, in his warped mind, makes it easier to raise money. he assumes that trashing existing shareholders is no impediment to finding new shareholders

 

To be honest I think that last part is true also. New money is always willing to step over the corpses of old money. That's why I believe the commons have so much more downside than the juniors: everyone is aligned against them; even Treasury because they have no reason to both maximize the warrants' value and write off the seniors.