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Wednesday, February 14, 2018 2:46:00 PM
Their net worth is say negative $5billion to round off. If memory serves the juniors outstanding have face of roughly $20b so $5b won't get paid. Best case that is...
I am assuming all outstanding debt - including senior preferred - are paid first per bankruptcy law and the PSPA. Also assuming they sell their entire $3 trillion mortgage portfolio at current mark-to-market prices as shown on their balance sheet. Probably a big mistake there. I doubt they would get full value after flooding the market with all this paper. Just a 1% discount on $3 trillion is a decrease of $30 billion bucks which leaves nothing for the juniors either.
Debt gets paid before senior preferred. Cash comes from the cash and equivalents on hand plus the sale of their mortgage portfolio.
But - liquidation is extremely unlikely in my opinion.
Much more likely - a grind back up to $3b net worth for each company, then modifications to the PSPA to allow more and more retained capital until they are safe to release. That may take years but it maximizes the value of the warrants so I think treasury will go that way.
All this assumes congress does nothing. When have they ever done nothing? Oh, wait... all the time.
I'm in a good mood - good news today on my WAMU shares - merging with Nationstar. They finally figured out how to monetize their $6B in NOL's. See you just have to wait.
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