Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 4481873 times)

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13680 on: September 10, 2019, 08:01:31 AM »
we will see but ideally the purpose of mnuchin's commentary to olick on CNBCTV about appealing Collins to the supreme court was a warning shot to the plaintiffs to avoid unnecessary greed in any potential negotiations.

of course Ds will file cert petition to scotus because if they dont do that, on 10/29/19 the collins district court will receive an order from the 5th C to implement relief in accordance with the 5th C en banc majority APA opinion


rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13681 on: September 10, 2019, 08:06:15 AM »
we will see but ideally the purpose of mnuchin's commentary to olick on CNBCTV about appealing Collins to the supreme court was a warning shot to the plaintiffs to avoid unnecessary greed in any potential negotiations.
Berkowitz will have his 5 bagger. Is not that enough? What are people thinking!

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It seems either ironic or carefully planned that the NWS will be ended by the administration just after a court finally called it ultra vires.
But Midas, we are talking the Treasury of the United States of America. The greatest pirate ever!

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13682 on: September 10, 2019, 08:07:02 AM »
we will see but ideally the purpose of mnuchin's commentary to olick on CNBCTV about appealing Collins to the supreme court was a warning shot to the plaintiffs to avoid unnecessary greed in any potential negotiations.

Certainly plausible. But if the administration ends the NWS by themselves, what exactly is there for them to appeal? Injunction would not be an issue, and any potential damages award by Judge Atlas would leave open its own opportunity for appeal.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13683 on: September 10, 2019, 08:17:40 AM »
my biggest fear was that sen. crapo would ask admin reform to stop pending congressional analysis of plan suggestions for congressional reform, and he did the EXACT OPPOSITE. crapo encouraged the administration to ACT

so the rest of this SBC hearing is gravy for me

Kennedy to Calabria: "I encourage you to saddle up and go!... Congress is going to do nothing, you need to get started and fix this car wreck."
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DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13684 on: September 10, 2019, 08:32:34 AM »
Mnuchin says more like 100b capital needed. That's 60b for Fannie and 40b for Freddie. This is the alternate bifurcated standard that they advocated for in their capital level comments.
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orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13685 on: September 10, 2019, 09:04:33 AM »
Mnuchin says more like 100b capital needed. That's 60b for Fannie and 40b for Freddie. This is the alternate bifurcated standard that they advocated for in their capital level comments.

Moelis has projection of 100B in captial with price before 10% appreciation at $11.73 @ 8.4 eps. That projects sweep ending in Q4 18 so will need to adjust for money swept of 3.2B+2.4B+/- 3.4B. So will need additional 5.9-9.3Billion. Just need to project for likely higher preferred capital conversion and could get pretty close to where things may end up. so $9-10 per share not withstanding any other "private capital". So a double from here?

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13686 on: September 10, 2019, 09:12:59 AM »
Mnuchin says compensation required for retaining capital as part of pspa. Specifically mentioned commitment fee an option. I'm now not expecting an increase in liquidation preference.
[E]xpedience does not license omnipotence.

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cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13687 on: September 10, 2019, 09:22:12 AM »
Mnuchin says compensation required for retaining capital as part of pspa. Specifically mentioned commitment fee an option. I'm now not expecting an increase in liquidation preference.

it doesn't matter.  no capital can be raised with an outstanding $117B senior preferred preference.  this will have to be cleaned out before capital raise begins but, of course, need not before sweep ends

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13688 on: September 10, 2019, 09:23:50 AM »
Moelis has projection of 100B in captial with price before 10% appreciation at $11.73 @ 8.4 eps. That projects sweep ending in Q4 18 so will need to adjust for money swept of 3.2B+2.4B+/- 3.4B. So will need additional 5.9-9.3Billion. Just need to project for likely higher preferred capital conversion and could get pretty close to where things may end up. so $9-10 per share not withstanding any other "private capital". So a double from here?

I would be extremely careful when trying to apply the Moelis plan.

  • It includes all of 2021's earnings being retained towards the capital base. You will have to add that to the equity raise too.
  • Page 25 has the earnings projections, which exceed earnings from 2014-2018 by a decent amount. The administration's talk of reducing FnF's footprint directly counters this. I would expect FnF's earnings to go down post-conservatorship, not up.
  • It has the juniors converting at 1.75 to 1, when the market ratio is more than twice that. Why would they accept such a bad conversion ratio?
  • The SPO investors get less than half of the equity in return for $75B in capital. They are providing the lion's share of the capital and are in a position of strength. Are they really going to settle for that little, especially with footprint reduction looming?
  • I also wouldn't take the $100B ball that Mnuchin lobbed and take off with it just yet. Calabria will be setting the final capital requirements, and he pegged it at "years and years" of retained earnings. I don't think he meant 4 or 5, which is what $100B would represent.
  • Perhaps the biggest red flag: why would junior preferred shareholders pay for and release a plan that involves the common shares gaining so much more than the juniors?
« Last Edit: September 10, 2019, 09:40:05 AM by Midas79 »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13689 on: September 10, 2019, 09:41:28 AM »
Moelis has projection of 100B in captial with price before 10% appreciation at $11.73 @ 8.4 eps. That projects sweep ending in Q4 18 so will need to adjust for money swept of 3.2B+2.4B+/- 3.4B. So will need additional 5.9-9.3Billion. Just need to project for likely higher preferred capital conversion and could get pretty close to where things may end up. so $9-10 per share not withstanding any other "private capital". So a double from here?

I would be extremely careful when trying to apply the Moelis plan.

  • It includes all of 2021's earnings being retained towards the capital base. You will have to add that to the equity raise too.
  • Page 25 has the earnings projections, which exceed earnings from 2014-2018 by a decent amount. The administration's talk of reducing FnF's footprint directly counters this. I would expect FnF's earnings to go down post-conservatorship, not up.
  • It has the juniors converting at 1.75 to 1, when the market ratio is more than twice that. Why would they accept such a bad conversion ratio?
  • The SPO investors get less than half of the equity in return for $75B in capital. They are providing the lion's share of the capital and are in a position of strength. Are they really going to settle for that little, especially with footprint reduction looming?
  • I also wouldn't take the $100B ball that Mnuchin lobbed and take off with it just yet. Calabria will be setting the final capital requirements, and he pegged it at "years and years" of retained earnings. I don't think he meant 4 or 5, which is what $100B would represent.

I agree on the caution and overlooked the 2021 retained earnings as you point out. Im too lazy to run the numbers but with preferred ~ a double from here depending on class IMO it still doesn't look like common clears the hurdle vs preferred  based on my superficial assessment in addition to what you said.