Fannie Mae-No Politics (FNMA)

[kthomp19]

So in a scenario where a 2/3 vote by jr preferred shareholders is undertaken, is that happening post-conservatorship?

I see it happening alongside release. There are so many moving parts that I think many things will have to happen at once:

1) Treasury dealing with the seniors, by either writing them down, converting them to commons, or a combination of both. I also have a scenario in mind where they could keep $70-80B of the liquidation preference intact, I plan to make a Twitter thread about this when I get the time.
2) Warrant exercise (or cancellation if the seniors are converted).
3) Capital raise. This will still be necessary (and in size) even if the seniors are gone, regardless of what some wishful thinkers say.
4) Junior-to-common conversion (if it happens, which I think is likely).

The junior pref holders can't know what a good deal is, and therefore whether it's worth accepting, without knowing what the final share count will be. But the same is true for the other parties! The final share count, and thus how the pie is divided, is the biggest unknown that everyone has to deal with. Therefore it will have to be nailed down at some point, and I think that will happen via agreement between those three parties (Treasury, new investors, juniors). Once capital is raised and the seniors are gone, conservatorship can end.

If indeed all voting rights have transferred, then it seems to me that to revert voting rights to any currentbshareholders, the Conservatorship must end.

Right. New investors won't buy new common shares that don't have voting rights (and, in my opinion, ones that don't have immediate dividend prospects given the utility-like nature of FnF).

The Director also appears to have enough power to initiate a prelim vote so that a firm commitment to end the Cship can be executed contingent on final vote outcome, and so forth.

Release is contingent on recapitalization, and those providing that capital (Treasury dealing with the seniors adds a ton to core capital, and new investors will provide the rest) will have the biggest say in how FnF's capital structure looks when release is feasible. The juniors have the ability to just refuse all offers and stay above the existing and new common shares in the capital stack; that's their main advantage here.