Sunday, January 17, 2021 10:48:04 AM
The seniors only get all of FnF's profits once FnF hit full capitalization, or $266B in core capital grossed up by asset base increases. I use 2.5% per year as a ballpark. But the seniors don't take all the profits until full capitalization, and even then they only get whatever is not paid out to other shareholders. The seniors are now in the back of the line in terms of dividends. They won't allow FnF to ever go above the 4% capital mark, but have no effect in terms of getting there.
No, read the section more carefully. The GSEs each get to keep the first $70B of commons they raise. All capital raises after that have their proceeds go to Treasury instead of FnF, and those proceeds pay down the seniors. That's a far-down-the-road consideration.
Also notice that FnF can't sell any prefs at all without Treasury's consent, and even then Treasury would get all the proceeds, meaning investors wouldn't bother. It appears I was right when I said that FnF's capital raises will be all commons; I used to qualify that with "unless the juniors are converted" but it appears we are getting all-common raises even then due to the new wording of Section 5.2.
A minority voted to strike down the NWS as remedy for the constitutional claim, but I don't think they specified what form that would take, let alone saying the seniors should be gone. Here is a link to the opinion if you want to search it.
This is a good question. It's clear that Treasury intends to exercise the warrants in full, so just doing so rather than making capital raises contingent on that would have made more sense. I can only guess as to why; my first thought is to give Yellen a reason to allow recap and release so as not to basically throw the warrants in the trash.
Read paragraph 4(a) at the top of page 6. It says all capital raises other than the first $70B of commons for each GSE have to have their proceeds go to Treasury instead of FnF, and the seniors get paid down by that amount. Of course, I don't think FnF will ever find investors who are willing to write checks and not have that money count towards capital.
How do you calculate that?
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