Fannie Mae-No Politics (FNMA)

[kthomp19]

the big question is: after the govt settles all this, what percentage of the company are the current common owners going to own of the company

Prior to the Collins ruling, when I thought there was a chance the seniors could be written down, I thought the answer would be in the mid to high single digits (5-9%).

The Collins ruling now makes a senior-to-common conversion highly likely because Treasury has no reason to give up the seniors for nothing, and courts are either unlikely (Collins/Bhatti), unable (USCFC), or not asked to (Lamberth) get rid of the seniors.

After a senior-to-common conversion and the subsequent large and necessary capital raise to hit the minimum capital standard required by law (2.5% of balance sheet assets), current common owners aren't likely to retain more than about 2% of the companies. Even less if the juniors are offered a conversion to commons.

I expect a rather hefty reverse split at the time capital is raised. Before Collins I thought it would be 10:1, now I'm thinking more like 25:1 to 30:1.