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Paulson may have extricated himself from following Miami Quagmire ... Hopefully Paulson washed his hands after the handshake ...
Giggidy giggidy ...
I think it is quite complex and if Scotus offers a favorable ruling to shareholders, any negotiation for settlements will include all sorts of terms, including the warrants, which everyone wants to say "isn't part of the litigation."
Uhh, it's part of the PSPA agreement and affects valuations of the shareholders. Rest assured warrants would be on the table ...
It is going to take time to figure out how this all is going to work, so it may be many years before this settles, and the gov has no incentive from the specific representatives to settle, as it is the gov's dime, not their own.
Way overestimation on settlements ... it's going to be a long slog ...
how good is the punchline that is the author bradford?
Nats - a settlement is possible. Who knows if it is likely ... Motions for Summary Judgment would likely get filed after a favorable Scotus ruling.
Maybe Paulson dropped JPS like a bad 80s haircut (seems to be the theme) and bought commons ...
Giggidy giggidy
Nice try ... JPS was up 10% on thin volume ... it was an obvious setup and more JPS retail got dupped ... you think Hindes sent out that note on his own? He got paid or is attempting to offload JPS.
I expect more JPS manipulation to allow for folks to exit out of what Tim Howard, former CFO of the GSEs, said about the Jr Preferred, e.g., FNMAS, trade, that it is a “quagmire.” Maybe bradford will quote that ....
Bradford is now a punchline ...
Looks like JPS got dupped again ... you guys never learn - amazing ...
So tomorrow do they let commons run just like the cap rule announcement ... comical ...
Where is the volume on JPS? Looks like a big headfake ...
kthomp - does it matter if Scotus provides direct guidance to the lower courts or does it themselves? Absolutely not. The cat is out of the bag. You're arguing timing, which actually goes to more retained earnings and then, after Scotus, possibly a settlement.
Tim Howard has stated, the JPS is "fantasy (cooked up by holders of Fannie and Freddie junior preferred stock hoping for a quick way out of a “quagmire” trade)"
Anything else is fabrication. The above is fact.
There could be an option where $124 billion is returned, liquidation pref goes to 0 and NWS is canned. I don’t think we get all of the $s but it is certainly in play.
Golf - it’s a contract. Folks are imparting traits on government players who don’t align with their perception of what is just, even though they are doing their job.
The contract basically requires an offset entry if the Treasury allows the GSEs to retain more capital without paying the NWS, which the NWS effectively equals a dividend payment equal to the total amount of net quarterly earnings(pre-2012 NWS it was a 10% dividend). The way to interpret the contract is the gov “originally” provided $180 billion to the GSEs, represented by the sr preferred shares, and those sr preferred shares have the right to be converted into commons shares for $180 billion, which is the liquidation pref.
Now, if the NWS dividend (post-2012 3rd NWS amendment) is not paid quarterly, then the liquidation pref must increase in relation to the lost dividend payments to the gov. So, when the Treasury allowed the GSEs to retain $25 billion in retained capital, the $180 billion liquidation preference went up by $25 billion = $205 billion (all things being equal). It is important to note that none of the $300+ billion paid to the gov has been used to pay down the liquidation pref. They have only been considered dividend payments. That is the whole key to Scotus.
There is/was legal risk to Mnuchin in unilaterally writing down the liquidation pref administratively as technically the DOJ could sue Treasury on behalf of taxpayers that the unilateral action of writing down the liquidation pref to 0 was possibly ultra vires. According to the PSPA contract, no GSE payments have been applied to the liquidation preference and could be seen as preferential treatment to hedge funds.
Mnuchin chose the easier way out. As has been stated in articles by industry participants, this latest “amendment” was all optics and can be reversed by Scotus and/or Biden/Yellen proportionally to their respective powers - Scotus has more in this instance.
By publishing the latest “plan,” Mnuchin basically stopped the NWS although the liquidation pref increase persists. Technically, the 5th circuits NWS remedy has yet to be implemented, but even if it were this agreement by Mnuchin displays a contrast in NWS remedy vs both the NWS remedy and writing down the liquidation pref.
Hopefully that helps.
burling - 100% false - if Scotus writes down the liquidation pref, then it is the beginning of the end of significant government interference and exactly like Ackman said, FNMA goes to $10 bucks.
We’ll just keep incorporating Tim Howard ... at best it’s a zero sum game for u guys ...
Yes, most likely any ruling will not allow two bights of the apple if Scotus is favorable.
Scotus must rule before all else ... I’m all for reasonable discussion but nothing is setup for a settlement until Scotus rules.
kthomp - again, this has been discussed in great detail.
Enjoy: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=160919221
Holden - what are you talking about?
Collins from Scotus simply wants the NWS cancelled going forward, the pspa deemed paid (writing the liquidation pref to 0), and they want $29.5 billion returned from the accumulated 10% overpayment.
I suggest reading the oral arguments ... we’ve been through this a number of times now ...
Holden - yep, scotus for liquidation pref to 0 and CFC FOR $124 billion, although Scotus could provide an injunction having Treasury return $124 billion if they want.
Read the oral arguments... its central to this investment.
kthomp - thank you for the reply. Per the PSPA the commitment fee has been added to the liquidation pref, and if Scotus zeros out the liquidation pref, then poof ...
Rick - 180 loaned and 300+ paid back = 124$ billion profit to gov. If the liquidation pref never goes down then the companies can never leave conservatorship and can never paydown the 180 billion loan.
The gov still has $220+ billion in liquidation preference that will drive the 10% dividend once the companies reach milestones in raising capital per the cap rule which is $100+ billion.
Stopping the NWS does nothing to account for $300 billion paid back to the gov. It is as if the $300 billion was just a gift and nothing more as there is no way to pay back the gov.
The easiest way to understand the latest amendment and current situation is if Scotus doesn’t write down the liquidation pref to 0 (the loan balance that was originally $180 billion to 0 from the $300 billion already paid), the the government could be repaid on a $180 billion loan something close to $750 billion - could be even closer to a 1 Trillion dollars from 2 private companies.
That’s incredible and would be bigger than most countries in the world will ever see over 100 years.
That’s why this latest move by Mnuchin, et al, is hilariously so ridiculous a significant portion of the reasoning behind this deal is to show Scotus how ridiculous and ineffectual the NWS remedy (cancellation) that Collins just received is. The 5th circuit said prospective (going forward) relief was sufficient = NWS cancellation only. Given the current amendment by Mnuchin, which ended the NWS, it is now plain for all to see that the NWS amendment alone is not sufficient. In fact it does nothing.
Retrospective relief is needed, which is applying past payments of $300+ billion to the liquidation preference per section 3(a) of the PSPA agreement.
Stock - thank Guido!
Hi FOF - here is what Tim Howard, the former CFO of the GSEs, says about the JPS settlement theory. His words, not mine.
Holden - 100% false. If Scotus rules the liquidation pref goes to 0 it’s done. FnF can go back to paying several 100 million a year for access to 100 billion until congress does the hardwork of actually resolving the GSE structure. But, even if congress does get that far, the companies will be long gone.
Holden, you have posted you were unaware Collins, on behalf of both Common and JPS shareholders, is requesting Scotus to zero out the liquidation preference.
A JPS investor out of one side of their mouth affirms Thompson’s professional representation of FnF shareholders, but from the other side claims the very remedy being sought from Scotus will not strategically resolve the core issue preventing these companies from exiting conservatorship.
The remedy Collins is asking for is at the very core of this trade.
Tim Howard, former CFO of the GSEs, says JPS shareholders are creating fantasies to create some hope in their “quagmire” trade. Those are his words, not mine.
I think Tim Howard, former CFO of the GSEs, said Junior Preferred Shares, e.g., FNMAS, now are in a “quagmire” trade and are coming up with fantasies to try and justify any value for JPS ...
kthomp, 100% false - conveniently omitting section 3a - see bold below
Havoc, that is the worst case scenario if Scotus or the CFC doesn’t act.
DCBill - sure, Scotus can do whatever they want but 5 core conservative justices who will follow the law at least directionally. No legal outcome is a sure thing, but I like the chances of those who truly support these companies before scotus.
Happy, technically the NWS is done. It is the liquidation preference you need to focus on.
There is a big difference between the NWS and sweeping all quarterly profits to Treasury vs increasing dollar for dollar the liquidation preference of the sr preferred shares.
There is no quarterly sweep, and it is important to remember that what just happened is exactly what the 5th circuit en banc said was enough remedy.
The remedy Collins asked for in the 5th circuit was to zero out the sr preferred shares (liquidation preference) and cancel the NWS going forward. The 5th circuit only granted remedy on the NWS only. Both items are being asked at Scotus and what Mnuchin did was force Scotus to see the remedy granted by the 5th circuit does nothing to allow the companies to get any closer to release.
It’s clear as day that part of the intent of the most recent “amendment” was to draw the vast, huge contrast of what just a cancellation going forward of the NWS does (which is absolutely nothing) vs writing down the liquidation pref and cancelling the NWS. It can’t be any more clear.
Golf, I hear what you are saying but I think you mean 0ing out the liquidation preference. The NWS is done.
WB - Guido is considering Scotus writing down the liquidation pref to 0, which IMO is better than a coin toss. Guido also believes $124 billion will be returned to FnF via CFC, which could happen or some solid %.
What exactly is wrong with what you have read?
Nice post
Mnuchin did stop the NWS and showed the world, most importantly Scotus, that the 5th circuit’s en banc prospective relief of just ending the NWS is not even close to enough as the government can do whatever they want as long as the preferred shares are in play. This is completely reflected in the latest “amendment.”
Louie, precisely ...
Ok JPS ... maybe, but not until after Scotus ... and if Scotus rules in line for what Mnuchin just set them up to do ... nope ...
Good luck!
Bradford has lost complete credibility ... and JPS is now worthless for a long time ...
DJVan, 100% incorrect. Read through the original agreement. It refers to paying down the liquidation pref several times.
DJVan - I’m sorry to say there is no deal. It is a narrative backed into a desired outcome.
Also, there is no language preventing a paydown of the liquidation pref.
FOF - so you’re in the settlement narrative camp. And what is to stop another litigant from bringing up the exact same issues to eventually get Scotus to take up the case again?
Good luck with the settlement viewpoint. It is just a JPS conversion narrative that died when Trump didn’t get re-elected.
Potty, they will absolutely be briefed on this amendment. It is at the core of the case and courts are notified all the time about recent events. You are incorrect.