Any posts are my opinion, and should not be relied on for your investment decisions.
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I agree and welcome fact based debate (pro or con). Even welcome opinions based on interpretation of found F&F information.
Like to see any character attacks cease. All of us researching and collaborating can be smarter investors than one of us alone.
Best to all here...
JW
I want more, but alas out of dry powder.
GL sidedraft
JW
GSEs make most of thier money from G-fees. Some from MBS and hedging activity. See slide 17 in the attached. TSY is only making Freddie sell off non-critical assets and will allow them to participate in the market at a later date and somewhat smaller size.
http://www.freddiemac.com/investors/pdffiles/investor-presentation.pdf
TSY is doing this for two reasons:
1. To open private competition (a secondary mortgage mkt), by making the GSEs sell off some patents and a great deal of proprietary info
2. Selling off the Assets will bring more $$ to TSY.
I think its good to review the 3rd amended Sr Pref agreement
See pg 6 specifically. TSY draws the line at no point will they require FMCC to hold less than 250B in Mort. Assets. Also they suspended the periodic commit fee (both good news to me)
http://www.treasury.gov/press-center/press-releases/Documents/Freddie.Mac.Amendment.pdf
Also, at this point they are going to allow FMCC little capital reserve
http://www.freddiemac.com/investors/er/pdf/2012er-3q12_release.pdf
On August 17, 2012, Freddie Mac, acting through FHFA, as Conservator, and Treasury entered into a third
amendment to the Purchase Agreement. This amendment, among other items, replaced the fixed 10 percent dividend rate with a net worth sweep dividend and suspended the periodic commitment fees (both beginning in 2013). Under this amendment, Freddie Mac will be required to pay dividends to the extent that its net worth exceeds the permitted capital reserve. The amount of the permitted capital reserve will be $3 billion in 2013 and will be reduced by $600 million each year thereafter until it reaches zero in 2018. The amendment effectively ends the circular practice of taking draws from Treasury to pay dividends to Treasury
I believe at the ~250B Mort Asset mark a much smaller FMCC is to be re-capitalized w/private capital with Congress charter removed as well and TSY holding warrants for 79.9% to continue to sell off over time.
This is the remainder of the brokerage "customer" claims.
The distinction between a "customer" claim versus a "general" claim is crucial in a situation like the Lehman case, in which Mr. Giddens is winding down the brokerage in accordance with the Securities Investor Protection Act. "Customer" claims are paid 100 cents on the dollar from Mr. Giddens' coffers
We CTs are in the "General" claims
This could move us closer-
Under the deal, Lehman Brothers' holding company will cut its "customer" claim against the brokerage to just $2.3 billion from $19.9 billion and reduce its "general" claim to $14 billion from $22 billion.
We won't know until after 4/16 (later this year):
Although the brokerage business isn't technically part of Lehman's Chapter 11 case, U.S. Bankruptcy Judge James Peck must approve the settlements. A hearing on the settlement with the holding company is set for April 16, while one on the U.K. settlement still isn't set.
New FAQs posted on LBHI EPIQ site http://dm.epiq11.com/LBH/Project
Link to doc (pg 11 has stockholder FAQs)
http://dm.epiq11.com/LBH/document/GetDocument.aspx?DocumentId=2267685
Exactly right. Are we really gonna hand this over to the private banks in the wake of the destruction they brought the US to in 2008?
I like reuters addition-
"However, with Congress focused on budget debates and with immigration and gun control top priorities, action on housing is not likely to come until at least 2014. After years of red ink, Fannie Mae and Freddie Mac are now profitable and the housing market is recovering, taking away the urgency for action."
http://www.reuters.com/article/2013/02/25/usa-housing-finance-idUSL1N0BP2MN20130225?feedType=RSS&feedName=marketsNews&rpc=43
Based on the Bloomberg article and here's the part I like...
"No Exit
The idea stops short of a dramatic government exit, and the details would be crucial to gauging the potential impact on various housing industry sectors, the relative effect on large and small lenders, the cost of credit for home buyers and the risk borne by taxpayers."
Without a dramatic exit (I think TSY and FHFA want a long exit duration), F&F will exist for the time being and with profits coming in likely pay back TSY before the dramatic exit is in place. That is our moment.
I suspect early next week may bring some volitility. If prices are to the downside...the I'll be looking at volume to show me the conviction of the sell.
FWIW, I am not selling any prefs today.
Best,
JW
I too like the non-discharge clause. I also have a different twist that the top creditors had more to gain by allowing LBHI to unwind the notional value in derivatives (by allowing LBHI to remain in business long enough to unwind after BK). Also, the illiquid real estate has growing value. How much they had to throw a bone to equity to tap this $$ remains to be seen.
This is very much a lotto ticket with higher probability of a payoff (fewer tix and some w/deeper insight).
I'm in it w/all of you. GLTA JW
Tsy is .1% away from ownership (they have warrants on 79.9% common). Hoping for better than 10-15% of FV. Even Ford in depths of the crises made a tender on KVU (pref) at 50% of FV.
Again, hope I'm wrong and they restore divis.
So, 12-15M shares of FNMAS today. Current value of ~$23-26.7M..FV of $375M.
Whenever I see these large blocks, I have to wonder if US TSY can buy GSE prefs.
I actually think as time passes and the GSEs have mostly paid TSY back, TSY will allow tender offer on prefs or will call them.
I do not think divis will be restored...hope I'm wrong, but either way it turns out OK in $$$.
Record date is one day before distro date...whoever holds them currently is entitled to the full deferred amount is what I read and understand.
More from prospectus-
Upon the termination of any deferral period and the payment of all amounts then due, Lehman Brothers Holdings may commence a new deferral period as discussed above. Consequently, there could be several deferral periods of varying lengths throughout the term of the junior subordinated debt securities. The regular trustees will give the holders of the preferred securities notice of any deferral period upon their receipt of notice from Lehman Brothers Holdings. If distributions are deferred, the deferred distributions on such distributions will be paid to holders of record of the preferred securities as they appear on the securities register of the trust on the record date following the termination of the deferral period. See "Description of the Junior Subordinated Debt Securities—Interest" and "—Option to Extend Interest Payment Period."
Payment of Distributions. Distributions on the preferred securities will be payable to the holders named on the securities register of the trust at the close of business on the relevant record dates. As long as the preferred securities remain in book-entry only form, the record dates will be one business day before the distribution dates. Such distributions will be paid through the property trustee who will hold amounts received on the junior subordinated debt securities in a property account for the benefit of the holders of the trust securities. Unless any applicable laws and regulations and the provisions of the declaration state otherwise, each payment will be made as described under "—Book-Entry Only Issuance—The Depository Trust Company" below.
RE: deferral
From the prospectus-
"Deferral of distributions would have adverse tax consequences for you and may adversely affect the trading price of the preferred securities.
If distributions on the preferred securities are deferred, you will be required to recognize interest income for United States federal income tax purposes in respect of your ratable share of the interest on the junior subordinated debt securities held by the trust before you receive any cash distributions relating to this interest. In addition, you will not receive this cash if you sold the preferred securities before the end of any deferral period or before the record date relating to distributions which are paid."
The 1/31/13 statement has ~$26B sitting in the trustees hands. Too bad ~$15B of it for LBIE.
http://admin.epiq11.com/LBI/document/GetDocument.aspx?DocumentId=2202334
No effect. Still in escrow, unless by some miracle LEH decides to call them and the trustee allows it.
Waiting with all other prefs at this point.
They are Jr Pref. Freddie does not have any like these.
Margin for FNMFO, that would be playing w/fire LD.
Yeah, I am not buying anymore FNMFO for now. RE: Lack of liquidity, wish I would have kept a volume study going across all the 25 & 50 prefs. since the Aug 2012 sell-off (which was relatively low volume)
Observation, it seems as if the volume has become low for overall sell-offs and overall higher volume across available pref classes on up days. The conviction seems to be in our favor. Again, I have not done the quantitative study.
Best JW
I bought a few with the August 2012 sell off. Only 25,000 total shares out on these, so they are quite illiquid. Price jumps all over.
They typically lag the 25s and 50s in price. I really like having the holder common conversion option (its like having a free call option).
Don't sell the kidney, take the cola bottles back at 10cents ea in MI...should get a few shares. j/k,LOL,
Best JW
FNMFO does have an adjustment feature as well for the comm. conversion at holders option...
f) The Conversion Price shall be adjusted from time to time as follows:
(i) If Fannie Mae shall after the date on which the shares of Series 2004-1 Preferred Stock are first issued (the “Issue Date”) (A) pay a dividend or make a distribution to all holders of its common stock in shares of common stock of Fannie Mae, (B) subdivide its outstanding common stock into a greater number of shares, (C) combine its outstanding common stock into a smaller number of shares or (D) issue any shares by reclassification of its common stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the Holder of any share of Series 2004-1 Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of common stock of Fannie Mae that such Holder would have owned or have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this clause (i) shall become effective immediately after the opening of business on the day next following the record date (except as provided in subsection (j) below) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification. If any dividend or distribution of the type described in paragraph (A) above is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared.
FNMFO...400 shrs traded as well today. Buy Cost=$2.1M+
I have a few of these, wish I had more...GLTA
FYI - link to description, prospectus link is on this page as well:
http://www.quantumonline.com/search.cfm?tickersymbol=FNMFO&sopt=symbol
I like this securities holder redemption option if the gov't only sells thier warrants at a much later date (no splits to raise comm. share price). "The preferred shares are convertible any time at the holder's option into 1060.3329 common shares of Fannie Mae"
When is FNMFO going to catch up ($105,000 FV pref)...last trade $3500/sh. Should be $6-7K/sh now.
June 20th
Hmmm...maybe start of summer and winter?
In the Northern Hemisphere, meteorological Summer begins on 20 June. In the Southern Hemisphere, meteorological Winter begins on this date.
http://en.wikipedia.org/wiki/June_20#Events
Some other possibilities major events that happened on 6/20 (LOL!)
1963 – The so-called "red telephone" is established between the Soviet Union and the United States following the Cuban Missile Crisis.
1972 – Watergate scandal: An 18½-minute gap appears in the tape recording of the conversations between U.S. President Richard Nixon and his advisers regarding the recent arrests of his operatives while breaking into the Watergate complex.
The restoral of Jr Pref divis could be done by FHFA, possibly even the GSEs board if the continued timely payments are made to Tsy. Jr pref redemption, purchases, retirement would need Treasuries written consent (not Demarco or Congress).
"In accordance with the Senior Preferred Stock Purchase Agreement, until the senior preferred stock is repaid or redeemed in full, Freddie Mac may not, without the prior written consent of Treasury, redeem, purchase, retire or otherwise acquire any Freddie Mac equity securities (other than the senior preferred stock or warrant)."
500 shares of LEHKQ just went over at .05
Like I said its a stretch. When I get the time I'll take a look at FNMA allowed networth amts starting in 2013 and the call dates of all FNMA prefs. See if any remote correlations can be drawn.
Tender offer would be nice.
I bought Ford prefs (ticker KVU) in the depths of 2009 (w/luxury of hindsight...wish I would have bought alot more). I picked them up btwn $2-3 per share. Ford made a tender offer at 50% FV($12.50).
I think a tender on GSEs would be in the 60-80% FV range (higher than Ford).
Its a stretch (I know), but I did find it intresting that they are allowing a capped net worth (equity) allowance for ea GSE and in FMCCs case it correlates with the last callable dates (in 2017).
Also, I do believe the banks that held jr prefs (based on regulator recommendations and specific IRS allowances to buy/hold them) would sue immediately and win if these jr pref do not get fair treatment.
At a minimum, would like to see a fair tender offer.
I posted this before, but wanted to raise again...
Also, Very interesting on page 8, FMCC the allowance to build a networth reserve starting at $3B (2013), $2.4B (2014), $1.8B (2015)...$0 in 2018. Trying to figure out - why allow the networth reserve until 2018? Isn't this equity? Is TSY leaving an out to allow them to recapitalize and sell off thier stake?
a quick look at all Freddie Jr pref call dates to see if it correlates to the equity networth allowance
Billions callable date
0.246 2001
0.15 2003
0.149 2003
0.396 2003
0.396 2003
0.297 2006
0.248 2009
1.01 2011
0.99 2011
0.34 2011 ~4.222B callable end of 2011 (NOTE - 3B reserve allowed in 2013 + 1.2B FMCC currently has as networth)
5.9 12/31/12 or 2017 (fmckj)
0.5 6/30/12
0.5 3/31/12
0.325 2013
0.322 2013
0.247 2014
0.5 2017
~12.516B Total Jr Prefs
I believe they would not want to re-capitalize until the 200B in lawsuits are settled with money center banks.
Also, Very interesting on page 8, the allowance to build a networth reserve starting at $3B (2013), $2.4B (2014), $1.8B (2015)...$0 in 2018. Trying to figure out - why allow the networth reserve until 2018? Isn't this equity? Is TSY leaving an out to allow them to recapitalize and sell off thier stake?
On August 17, 2012, Treasury announced modifications to the Purchase Agreement aimed at supporting the continued flow of mortgage credit by providing the market with additional confidence in the ability of the GSEs to meet their commitments while operating under conservatorship
The modifications to the Agreement include:
» Replacement of the fixed 10% dividend payment with a variable dividend payment based on net worth (a “net worth sweep” dividend) beginning for the first quarter of 2013
– The agreement allows Freddie Mac to build a net worth reserve of $3 billion during 2013; the reserve will be reduced by $600 million each year beginning in 2014 until
it reaches zero in 2018
– The “net worth sweep” dividend for a quarter would be equal to the amount of Freddie Mac’s net worth in excess of the reserve at the end of the immediately preceding quarter
– If the calculation of the dividend amount for a quarter does not exceed zero, then no dividend will be paid for that quarter.
At the time of its bankruptcy, Lehman Brothers had an estimated $35 trillion notional derivatives portfolio.
12/13/12 - Epiq site has posted a new Q&A doc
http://dm.epiq11.com/LBH/Document#maxPerPage=25&page=1
From the first page of that document...
"The Company receives a number of questions on derivatives assets in connection with SPVs. The Company has been pursuing various strategies to unwind SPV deals including SPV notes purchases, bi-lateral negotiations, mediations and litigations. The Company does not believe that disclosing additional information about the SPV activities is in the best interest of maximizing recoveries."
Would love to find a pot of gold here in addition to the residual assets discussed here. I believe they must stay in business long enough to unwind these derivative assets.
Happy Holidays and Best Wishes to everyone.
JW
From what I can find, looks likke Cereberus bought the Chatham trust. But it looks like the Anaheim and Ontario trusts are still not sold (I cannot find anything). Also, could not find any creditor distros.
Check out docket #1804 (specifically pdf pg #93 and 94)
http://www.omnimgt.com/SBLite/Templates/A/DocumentsList.aspx?clientId=CsgAAncz%2b6ZKD8BOSMzHQYDUFL72gLqUNwtjYiYunMJkGyhC3pvux6vAxTEbXTL2ouiExJta6Kw%3d&tagid=174
217. The distribution provisions under the Remaining Debtor Plan under which, after payment of certain allowed claims, the Innkeepers USA Trust Preferred C Interests share in the
$7.4 million of cash, the proceeds of the Chatham Hotel Sale Transaction, and other available assets, shall not be changed adversely to the Innkeepers USA Trust Preferred C Interests absent
the consent of the Ad Hoc Committee.
218. Holders of Innkeepers USA Trust Preferred C Interests and the Ad Hoc Committee shall be deemed to be Fixed/Floating Releasing Parties, Anaheim Hotel Releasing Parties, and Ontario Hotel Releasing Parties; and the Ad Hoc Committee shall be a Remaining Debtor Releasing Party.
This agreement was included and agreed to in the POR (see pdf pg 60)
http://www.omnimgt.com/CMSVol/CMSDocs/pub_45890/259849_1800.pdf
Have the pref holders received any distros yet? Looks like there is still a chance depending on what the remaining assets sell for (after quick read looks like pro rata sh is ~6%) Chatham trust was sold to Cerberus for 1.1b
I believe BNYM only filed the claim (#22123) on behalf of LHHMQ and not under the guarantee (as debt).
http://dm.epiq11.com/LBH/Claim#Claim=22123&ds=true&ex=false&maxPerPage=25&page=1
Hmmm...some of the info in this article looks dated. Lehman made its first (and so far the largest) payment early this year.
Still holding my CTs and some prefs. GLTA
JW
WOW some heavy volume on FNMAI...~1.2M (according to Scottrade). In early 2011 (Jan & March) couple of 4-5M vol. days on FNMAI
Don't know what we can read into it
Active CT discussion on LEHNQ ihub board...
No canary here...just VERY low volume = extreme volitility.
the gse pref are a unique chance
Have you been able to snag any of these? I bought (4) a couple years ago. I do believe some close variant of the milstein plan will be the release of the GSEs (just waiting for more profits and housing price trend upward)
Link
http://online.wsj.com/public/resources/documents/WilsonCenter5.22.12.BlueprintforHousingFinanceReform.pdf
About time these caught up w/other prefs. I was trying to p/u a couple more of these for 3K (no luck).