Fannie Mae-No Politics (FNMA)

[JOoa0ky]

1) At the moment, zero because FnF have $23B in capital and the seniors have a liquidation preference of $200B. If the seniors were to be cancelled or converted to common, the book value of the juniors right now would be $23B, or around 2/3 of par.
2) I already answered this one, saying "I believe it is very high, because the prefs must be dealt with (most likely exchanged for commons) to achieve a recap. A re-IPO with this huge block of prefs in the capital structure is much more difficult than if they were exchanged for commons."

Regarding the liquidation preference and getting the juniors out of the way so that the re-ipo is easier is something that I've always sort of accepted... but I've been thinking is it really that important in this case?

In all the previous cases, AIG and CITI, they were raising capital and selling off assets because they were wounded/haven't recovered. The future was blurry, unclear, and definitely uncertain. In such instances I would understand wanting to get the juniors out of the way so that in the case that they get liquidated you can rank higher on the capital structure.

In FnF's case, there is no such uncertainty. So does leaving the juniors with a higher liquidation preference even matter when liquidation isn't even a remote possibility?