Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2877377 times)

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11620 on: February 07, 2019, 12:49:10 PM »
"Termination or any change to the PSPAs requires Treasury's consent." 

my point is that once GSEs are out of conservatorship, enforcement of provisions in contracts that require GSE boards of directors to violate their fiduciary duties will be denied.

edit:  I do think that some of us have gotten inversion derangement syndrome.  it is always good to invert, but like anything else, should be done smartly.  if the admin develops a plan to raise $150MM in fresh capital, and they are inclined to do it in the most practical manner possible...because that is what investment bankers like Mnuchin and Phillips have been trained to do..., and there is a moelis blueprint out there that has done a lot of the heavy intellectual lifting to get this done, then I think some of these curve ball scenarios are beyond unlikely.
« Last Edit: February 07, 2019, 12:57:14 PM by cherzeca »


rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11621 on: February 07, 2019, 12:52:31 PM »
"Termination or any change to the PSPAs requires Treasury's consent." 

my point is that once GSEs are out of conservatorship, enforcement of provisions in contracts that require GSE boards of directors to violate their fiduciary duties will be denied.
I understand. But how do they get out of conservatorship without capital? And how do they amass capital if the PSPAs aren't changed, which requires Tsy's consent? That is the 1st hurdle. Am I mistaken?

I believe HERA says the conservator can only terminate the conservatorship once the companies have sufficient capital. So refinancing comes prior to ending the conservatorship. Which all leads to Rome: PSPAs.
« Last Edit: February 07, 2019, 12:57:12 PM by rros »

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11622 on: February 07, 2019, 12:57:57 PM »
PSPAs and Conservatorship are separate issues. FHFA placed them in conservatorship, not Treasury. So Treasury has no say in getting them out.

It's even simpler than that. Check section 5.3 of the SPSPA.
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/2008-9-26_SPSPA_FannieMae_RestatedAgreement_N508.pdf

Quote
5.3.Conservatorship.  Seller shall not (and Conservator, by its signature below, agrees that it shall not), without the prior written consent of Purchaser, terminate, seek termination of or per-mit to be terminated the conservatorship of Seller pursuant to Section 1367 of the FHE Act, other than in connection with a receivership pursuant to Section 1367 of the FHE Act.

Treasury has direct veto power over any release. So while Treasury can't release the companies, they can stop FHFA from doing so. Treasury doesn't just have the de facto power that you claim, they have direct contractual power too.

my point is that once GSEs are out of conservatorship, enforcement of provisions in contracts that require GSE boards of directors to violate their fiduciary duties will be denied.

I think this will be moot, as the seniors will be dealt with prior to release.

My original point is that the "Treasury writes a $122B check to FnF" route allows for a recap without having to appease outside investors. Then they can impose whatever crazy capital standards and footprint reduction they want, then deal with the seniors, then allow the companies to be released.

18436572

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11623 on: February 07, 2019, 12:58:40 PM »
It makes things more complicated than necessary (why are we transferring assets down the road in a 2-5 year transition process according to them) and at the same time forfeiting the governments 80% equity... Good luck with that

I think the warrants survive receivership and transfer to the LLREs. But I agree, it seems more complicated than necessary.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11624 on: February 07, 2019, 01:00:50 PM »
"Termination or any change to the PSPAs requires Treasury's consent." 

my point is that once GSEs are out of conservatorship, enforcement of provisions in contracts that require GSE boards of directors to violate their fiduciary duties will be denied.
I understand. But how do they get out of conservatorship without capital? And how do they amass capital if the PSPAs aren't changed, which requires Tsy's consent? That is the 1st hurdle. Am I mistaken?

I believe HERA says the conservator can only terminate the conservatorship once the companies have sufficient capital. So refinancing comes prior to ending the conservatorship. Which all leads to Rome: PSPAs.

agree that there would be a capital raising plan that treasury would have to accommodate by amending the senior pref...which it will want to do in order to implement the plan successfully and create value for warrants....and at some point in that plan the FHFA would release GSEs out of conservatorship. 

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11625 on: February 07, 2019, 01:01:06 PM »
and there is a moelis blueprint out there that has done a lot of the heavy intellectual lifting to get this done, then I think some of these curve ball scenarios are beyond unlikely.

I agree that Moelis laid out the most likely path. But if Treasury writes a giant check, it will be because the Fifth Circuit ordered them to. I believe that qualifies as a curveball, because none of us would see it coming. It could also be the basis of a settlement, if Treasury somehow preferes writing that giant check and keeping the seniors over the inverse.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11626 on: February 07, 2019, 01:06:05 PM »
and there is a moelis blueprint out there that has done a lot of the heavy intellectual lifting to get this done, then I think some of these curve ball scenarios are beyond unlikely.

I agree that Moelis laid out the most likely path. But if Treasury writes a giant check, it will be because the Fifth Circuit ordered them to. I believe that qualifies as a curveball, because none of us would see it coming. It could also be the basis of a settlement, if Treasury somehow preferes writing that giant check and keeping the seniors over the inverse.

that's not the way courts work.  if collins en banc voids NWS under APA claim, it sends case back to district court for that judge to implement remedy.  at that point judge asks parties what works for you both?  imo parties will both say terminate senior pref.  I am not sure what hoops treasury would have to jump through to write a 12 figure check, and Ps have no interest in making treasury jump through those hoops.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11627 on: February 07, 2019, 01:10:33 PM »
reporting from Otting's speech today:  https://twitter.com/vtg2/status/1093608337055338503

no more waiting for Godot

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11628 on: February 07, 2019, 01:17:11 PM »
reporting from Otting's speech today:  https://twitter.com/vtg2/status/1093608337055338503

no more waiting for Godot

I read this a couple of times and thought, receivership would force legislative action...

Where is Gadot?  :)
Not Investment Advice. Do Your Own Research.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11629 on: February 07, 2019, 01:19:40 PM »
reporting from Otting's speech today:  https://twitter.com/vtg2/status/1093608337055338503

no more waiting for Godot
Thank you, Chris!

Midas, thank you for clarifying it.