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Because negative net worth for 60 straight days is what triggers mandatory receivership under HERA. See 12 USC 4617(a)(4)(A)(i):
Quote:
(4) Mandatory receivership
(A) In general
The Director shall appoint the Agency as receiver for a regulated entity if the Director determines, in writing, that—
(i) the assets of the regulated entity are, and during the preceding 60 calendar days have been, less than the obligations of the regulated entity to its creditors and others
It has nothing to do with cash flow, profitability, cash in the bank, etc. Only balance sheet net worth: assets minus liabilities.
Stunning. FHFA says without DTAs in 2008 that FMCC was actually insolvent!
"In fact, after deducting its DTAs, Freddie Mac would have had a negative net worth as of June 30, 2008." -- Mark Calabria. This 3 paragraph section sets a new tone for this entire conversation. This report was issued on June 20, 2020 and clearly reflects his thinkin in drafting the pending Rule.
I do not see Mark Calabria backing off. These are his words under his signature as Director.
JMO.
Quote:
According to a press release from Freddie, J.P. Morgan will provide “strategic counsel and perform a range of tasks to help facilitate Freddie Mac’s exit from conservatorship, including advice and assistance on valuation analysis, consideration of potential capital structures and assessment of capital raising alternatives.”
“J.P. Morgan is pleased to be selected as Freddie Mac’s underwriting advisor,” the bank’s chairman and CEO Jamie Dimon said in prepared remarks. “We look forward to working side-by-side with Freddie Mac on this historic assignment in the months ahead.”
Months. Not years, months. There is also this:
Quote:
“If all is going well, [in] 2021, 2022 we will see very large public offerings from these companies,” Calabria added. “We will be allowing these companies to go out there and raise the capital they need so they can get out.”
Calabria is not going to slow-walk this on purpose.
Warrants don't own anything since the Treasury loan was paid and overpaid back. Commons and JPS own 30 billions in the company and the overpayments which are still to be determined between 30 and 120 billions.
lollapalooza my friend.
You.
Just.
Wait.
And.
See.
Can someone please explain the 90-100% dilution.
I'm not clear on the definition as in with 90% that would leave us old shareholders owning 10% of the company at 100% dilution we'd be wiped out? Or is it at 90% we end up with 900 million more shares on the market and at 100% we end up with 1 billion more shares?
Dear Honorable Mark Calabria,
Be a man, do the right thing.
Sincerely,
Gotta spend money to make money, right!?
Except, the GSEs can't spend capital while trying to raise $100-150B in new capital.
And the JPS aren't going away without a juicy Conversion to Commons or Big Dividends wink
Your loss!
Its coming amigos.
BOOOOOOM!
The way you guys are so adamant about the JPS just encourages me to keep accumulating commons.
Thank you!
Jps are not CET1 by definition. But they are still part of the capital structure. That's why there's absolutely no reason to convert them to commons. They can be either swapped for new lower coupon preferreds or just ignored until the corporations are fully capitalized.
"In May, the FHFA released a new proposed regulatory capital framework for the GSEs that is expected to require us to hold significantly more capital than the rule proposed in June of 2018. While the re-proposed rule maintains a mortgage-risk-sensitive framework, it includes additional requirements that increase the minimum leverage-based capital, require capital buffers that can be drawn down in periods of financial stress, impose minimum percentages or floors on risk-weighted exposures and on retained portions of credit risk transfer transactions and provides less capital relief for credit risk transfer activities than under the 2018 proposal.
We believe the new proposed capital rule could have significant consequences for our business model, capital planning and ability to attract private investment if implemented as currently proposed. We plan to submit a public comment letter with our recommendations for the final rule.
Finally, as you are aware, we announced last month that we retained Morgan Stanley as our underwriting financial adviser to assist in development of a recapitalization plan that is critical – a critical input into our FHFA directed transition out of conservatorship. The Morgan Stanley team, along with our legal counsel, Sullivan & Cromwell, has been integrated into our process. We plan to continue to work closely with FHFA to develop and implement a responsible and viable approach that enables us to exit conservatorship."
----------------------------------------------------------
Fannie earnings call. I assume freddie should follow suit?
I believe on the earnings call, they said they would submit their own comment.
Getting closer to comment period ending ...
Par would be good if possible.
Don't think that will go also with conversion.
Some people here think PS will get both par and then conversion. I don't think the government will be that generous and they will say it would be unfair for the taxpayer
When did goldman come in? I thought it was JPM and MS.
HAckerman should be his real name
he is one whiney little beech
He is one of several persons I will never read what they write again.
LMAO!!!
They can always retain earnings their way to release in 2028!
Progress is not always realized incrementally. There are times where it just builds up to a point where it all happens in a single instantaneous moment.
In fact, we just made it to the 100th anniversary of the 19th amendment. For centuries there was no progress on women's right to vote and then it happens in one big BANG.
Hopefully, this doesn't take as long!
No one's gonna care about the legacy investors (wall street is full of them they're called failed investors)...at least not the ones since the conservatorship... Nothing like investing in the ultimate uncertainty... Sounds more like pleading... Very unbecoming
Delist on OTC and RELIST on NYSE.
Do not abandon your conviction in the 11th hour as so many do.
What was the reason for yesterday's sudden increase in PPS?
A leak?
Assets under management for Midas Directed Investments?
Can’t find any information on it. Can anyone else find any information on Midas Directed Assets? Considering they are commenting on FnF cap rule, I’d like to understand this “company” more.
BOOOM Shakalaka
Right on!
The real prize comes much later (:
After release, do not sell. Hold for another 25-40 years.
The future dividends will become the bedrock of your portfolio.
Calling all right whales.
I still stand by my theory that the money is secondary but rather who Mnuchin will hand ownership of the companies over to is the primary.
The current c-suite and board are just puppets.
The real question is who will be the new captain of this ship.
Senior cram down is off the table as per FHFA.
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/Stock-Cert/Third-Amend-FNM-Stock-Cert-as-amended_09-30-2019.pdf
"6. No Conversion or Exchange Rights
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or
exchange such shares for any other class or series of stock or obligations of the Company"
Is PPS going to last the decline until October?
Cheers to everyone who has decided to stake their name here regardless of whether you're commons or prefs.
Tis the bet of our life time. That much is undeniable.
We are all bickering over commons vs prefs...
Commons will be X price.
Prefs will hit par.
Prefs will get conversion.
Will warrants get exercised?
SPS cramdown?
SCOTUS will rule favorably.
Catman will lose his nuts.
Share price will be XYZ.
In actuality none of that is even important. The one true purpose for Mnuchin releasing the GSEs is that he gets to decide who will be the next owners of FnF. Their earning prowess will take care of itself in due time.
JPS cancellation will add to CET1.
Since they are noncumulative, divs never have to be turned back on ever. They can just be cancelled permanently.
The amigos are coming.
It is a recco.
Timeline 101 if there is a SPS cramdown, JPS will get diluted to oblivion.
If JPS were to convert, they would convert first and then cramdown occurs second. JPS diluted to oblivion.
JPS are junior to seniors. There is no way the seniors go first and JPS go second.
JPS massive dilution to come... Its coming amigos.
It's not like Jr. Preferreds can be diluted, unlike FNMA Commons.
My baseline market cap estimate is $200-250B. FnF have made upwards of $23B per year in the past, but their earnings have been inflated by almost $8B per year for the last 8 years due to a drawdown of a $72B benefit for credit losses. Only $9B remains of that, so it will roll off early in 2021.
Thus my go-forward estimate of FnF's combined earnings is around $18B. A P/E range of 11-14 gives a rough market cap of $200-250B.
With 1.8B outstanding shares, a no-dilution gives a price range of $111.11-138.89, which I have just rounded to $125 in my calculations.
Divide by 5 for the warrants to get $25, then the capital raise will cut that by at least 2/3. Add in a junior-to-common conversion and that's where my estimate of $5 comes from.
Agreed. 1-For-10 Reverse Split for FNMA is likely.
$2 FNMA would become $20.
It's coming amigos!
Honestly its just to keep up with the news.
The dog poop throwing is just for **** and giggles because at the end of the day, everyone is probably wrong and this whole thing is just a dice throw anyway!
You can never rule out Value Menu FNMA. And with no positive news for Commons in the near term, it's likely it fills that Gap around $1.65.