Fannie Mae-No Politics (FNMA)

[GAK-]

I'm trying to understand conversion rights of the Pfd shares. On page 30 of the prospectus for Series T, it outlines ALL of the preferred stock that was outstanding in the year 2008 and says:

"Each of our outstanding series of preferred stock has no par value, is non-participating, is non-voting, and has a liquidation preference equal to the stated value per share. None of our outstanding preferred stock is convertible into or exchangeable for any of our other stock or obligations, with the exception of the Series 2004-1 Preferred Stock issued in December 2004 and the Series 2008-1 Preferred Stock that is expected to be issued on May 14, 2008."

It would appear that Pfds have no conversion rights and no contractural par value (with the exception of the 2004-1 and 2008-1 series). In other words, they are not guaranteed any particular number of shares in a conversion. Their only rights are to the coupon rate, which is not worth much while the companies are restricted from paying dividends. Thus, they might be offered a conversion at $20 per share (which in 1 year will be a good deal), or the option of holding their Pfd share which will pay them nothing until FnF are fully capitalized. My guess is that if they made such an offer, many pfds would take it.



https://capmrkt.fanniemae.com/resources/file/ir/pdf/stock-info/series_T_05152008.pdf