Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3706437 times)

onyx1

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14400 on: December 02, 2019, 09:54:23 AM »
https://housingfinancestrategies.com/235-2/

Latest from Craig Phillips

There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking?


Phillips: "I also believe that there is not only consensus but complete cooperation between all the relevant parties, particularly Secretary Mnuchin and Director Calabria.  I am very supportive of the recommendations in the Treasury report and believe they are possible to achieve."

Sounds like they are all harmonizing Kumbaya.


Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14401 on: December 02, 2019, 10:28:24 AM »
Bloomberg Law quote...
https://news.bloomberglaw.com/banking-law/fannie-freddie-investors-should-be-paid-ex-treasury-aide-says

Fannie Mae and Freddie Macís existing shareholders should be compensated as part of any overhaul that ends U.S. control of the companies, according to a former top adviser to Treasury Secretary Steven Mnuchin.
A wise husband, a wise father, asks God for help. Don't be a prideful, self-reliant fool. "Father, lead me, 'cause I can't do this alone..." Lead Me by Sanctus Real: https://www.youtube.com/watch?v=yLr6G8Xy5uc

onyx1

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14402 on: December 02, 2019, 11:19:14 AM »
https://housingfinancestrategies.com/235-2/

Latest from Craig Phillips


"The junior preferred stock should be exchanged for common stock on a basis that is viewed as fair, based on capital markets standards and the prevailing market value of those securities."  --Phillips

What is he referring to when he says "those securities"?

If he is referencing the common, no issue.  But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair".

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14403 on: December 02, 2019, 11:34:04 AM »
https://housingfinancestrategies.com/235-2/

Latest from Craig Phillips

There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking?

I agree that this is the question and it would be lazy to think phillips is in effect representing treasury's view.  while he did work at treasury 2 years with full responsibility to work on the issue, he is now a private citizen.  I would say, however, that he seems to regard the issue as a banker, understanding what would be necessary in the capital markets in order to proceed with the plan....and of course, Mnuchin has the same mortgage finance/capital markets background as phillips.

you may recall that whenever Calabria has been asked about litigation, he says something to the effect that most of that will go away as they proceed with the plan...just another indication that what Ps are asking for the Ps will effectively get...though Ps are asking for about $25B more than just the cancelling of the senior preferred that phillips just told us is a necessary condition to raising common equity capital.

the Washington federal case is an outlier for the govt though.  this suit seeks $41B in damages from the USA, not the GSEs, so that it is not necessarily a case that must be settled in order to raise capital, though I would bet that the govt wants everything settled at the same time...and to my mind, the most interesting part of judge Sweeney's transcript is the way she credited Washington federal's allegations in her open court remarks.
« Last Edit: December 02, 2019, 11:41:18 AM by cherzeca »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14404 on: December 02, 2019, 11:47:50 AM »
@onyx

"If he is referencing the common, no issue.  But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair"."

this junior pref for common exchange at par as opposed to trading price is something that the Ps will insist on in order to settle litigation.  now, it is fair to say that the rafter case before Sweeney is a common shareholder case (Ackman) and the Fairholme action before Lamberth includes both junior prefs and common classes, so there will be some division within the P ranks but I think the balance of power among Ps falls decidedly to the junior prefs

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14405 on: December 02, 2019, 12:00:56 PM »
@onyx

"If he is referencing the common, no issue.  But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair"."

this junior pref for common exchange at par as opposed to trading price is something that the Ps will insist on in order to settle litigation.  now, it is fair to say that the rafter case before Sweeney is a common shareholder case (Ackman) and the Fairholme action before Lamberth includes both junior prefs and common classes, so there will be some division within the P ranks but I think the balance of power among Ps falls decidedly to the junior prefs

I took the "prevailing market prices" part of Phillips's exchange comment to refer to the common share price, i.e. the juniors will be offered a conversion at a common share price based on that in the market at the time of conversion. Citi offered their prefs a conversion at 85-95% of par at $3.25, where $3.25 was the average of the previous 22 trading days' common closing prices.

That's what I'm expecting with FnF, and is the basis for the tweet I made earlier today. Shorting the commons to buy prefs, driving the common price down for a bigger conversion ratio, and then covering the short with some of the converted shares is highly tempting if there is a strong reason to believe that FnF's conversion will work like Citi's.

https://twitter.com/midas79_/status/1201551381733281792

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14406 on: December 02, 2019, 01:42:08 PM »
https://twitter.com/ACGAnalytics/status/1201594013318598658

@cherzeca - if the above is true, does SCOTUS delaying the decision to accept/reject the petition to Jan change the Collins timeline at all (oral arguments expected March/April with decision to follow in June/July).

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14407 on: December 02, 2019, 03:01:35 PM »
https://twitter.com/ACGAnalytics/status/1201594013318598658

@cherzeca - if the above is true, does SCOTUS delaying the decision to accept/reject the petition to Jan change the Collins timeline at all (oral arguments expected March/April with decision to follow in June/July).

I wonder why the scotus conference might be delayed, but for all we know, the trial in senate with Roberts presiding might delay things even further.  I would think that if one or more petition are granted cert in collins, there will be a decision by end of summer 2020.

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14408 on: December 02, 2019, 04:04:40 PM »
@onyx

"If he is referencing the common, no issue.  But if the prevailing market value of the Jr's is included in the exchange calculus, and the Jr's aren't trading at or near par, Jr holders won't view this as "fair"."

this junior pref for common exchange at par as opposed to trading price is something that the Ps will insist on in order to settle litigation.  now, it is fair to say that the rafter case before Sweeney is a common shareholder case (Ackman) and the Fairholme action before Lamberth includes both junior prefs and common classes, so there will be some division within the P ranks but I think the balance of power among Ps falls decidedly to the junior prefs

I think those hoping for something like an 8-10x exchange ratio for jr pref to common are likely to be disappointed.  If we even get to the point of a deal / exchange, the Jr pref has less leverage than most assume given the govt's warrants and commoners interests are likely aligned plus the threat of not turning on the non-cumulative dividends for many years (I don't think a common dividend is necessary to sell shares).  Moelis was more like 3x.   If they would fairly retire the sr pref I guess the jr pref holders would take something near or slightly above Moelis.

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14409 on: December 02, 2019, 04:06:53 PM »
https://housingfinancestrategies.com/235-2/

Latest from Craig Phillips

There are some very specific and relevant recommendations in there. What we need to ask is: how much of what Phillips is saying is just his view compared to what Treasury is actually thinking?


Phillips: "I also believe that there is not only consensus but complete cooperation between all the relevant parties, particularly Secretary Mnuchin and Director Calabria.  I am very supportive of the recommendations in the Treasury report and believe they are possible to achieve."

Sounds like they are all harmonizing Kumbaya.

unfortunately the only complete cooperation we see right now is mnuchin spending the last 3 months appealing the Collins ruling while Calabria muzzles his prior honorable commentary and remains a party of the anti-shareholder litigation.