Fannie Mae-No Politics (FNMA)

[kthomp19]

One big difference: Were the citi preferred shares that got converted cumulative?

These things are not all that easy to find information on. Four publicly-held series were offered the conversion: E, F, T, and AA.

Here is a link to the Series AA prospectus. It is non-convertible and non-cumulative.

On page S-7 (page 11 of the pdf) it says "The Preferred Stock will not be convertible into, or exchangeable for, shares of Citigroup common stock". This clearly did not stop Citi from offering a voluntary exchange! Thus the argument that FnF's prefs have similar non-convertability language in their circulars does not mean they cannot be offered a conversion or exchange later. I can't tell you how many times I shot that argument down, but this is the best proof yet. (I'm not saying you have made this argument, I'm just putting it there for the interested reader)

Here is a link to the Series T prospectus. This one is non-cumulative also, but is convertible. On page S-2 (page 6 of the pdf):

Each share of the Convertible Preferred Stock (or each 1,000 depositary shares) may be converted at any time, at the option of the holder, into 1,482.3503 shares of Citigroup common stock plus cash in lieu of fractional shares, subject to anti-dilution adjustments (such rate or adjusted rate, the “conversion rate”). The initial conversion rate reflects an approximate initial conversion price of $33.73 per share of Citigroup common stock for each share of Convertible Preferred Stock (or each 1,000 depositary shares).

However, Citi's voluntary exchange offer to Series T holders was at 95% of par at $3.25 per share, around 1/10 of the conversion price in the prospectus (keep in mind that Citi has since done a 1-for-10 reverse split). Thus the conversion clause ended up being moot.