Fannie Mae-No Politics (FNMA)

[kthomp19]

There is a clear spread difference between the variable and fixed rate high yields. Only about 2 of Fannie preferreds are variable with a redemption of 850 million and a total preferred redemption of about 19 billion. Freddie has about 8 preferred issues which are variable of which redemption value is about 1.6 billion with a total of about 13.5 billion in total redemption.

Is your point that the variable-rate prefs with low current rates could just be ignored when it comes to the share exchange or other treatment of junior pref shareholders? I can see that happening. It's hard to tell where those would trade relative to par if they just continue to exist post-release and have their (tiny) dividends turned back on.

The fact that many of those series still trade in the vicinity of 16% of par ($8 for the $50s), while the higher-div prefs are around 18-20% of par ($9-10 for the $50s) tells me that the market still sees substantial value in the liquidation preference of the low-yielders.

FNMAS and FMCKJ make up a large portion of the total pref face value. While their div rates are technically variable, they have high div rate floors. That plus the 5-year call protection means that holders of those series should expect favorable market pricing (above par), and perhaps favorable treatment in the share exchange too.