Fannie Mae-No Politics (FNMA)

[kthomp19]

It would be alot easier to issue more JPS shares at a lower rate and use that to pay off jr. preferred shares slowly over the next 15-20 years.

Equity never gets "paid off". That's why the seniors still exist.

As to the form of recap:

1) Calabria wrote that FnF's capital "should also largely be in the form of common equity and calculated on a non-risk-adjusted basis."
2) Don Layton said that (start at 41:02) "the vast majority of that is going to be common equity". The "that" refers to Freddie's capital.

This idea of a recap that involves a lot of non-cumulative preferred shares is pure fantasy. It's going to be either mostly or completely composed of new commons. The new buyers will have a large chunk of the company, Treasury will have 79.9% of what's left, and current commons will be diluted down to 3-6%. Nothing else fits with everything that we have heard.

The problem is everyone wants paid "now".

Of course. The junior pref-holding plaintiffs have to agree to drop their lawsuits. They won't do that in the face of some plan that doesn't involve them getting their dividends restored immediately.