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Thursday, December 15, 2022 4:22:44 PM
Seriously, I am not trying to be a smart aleck, trying to understand how the Treasury will take out the shareholders. And if the common stock is wiped out what would stop the Treasury from taking out the JPS?
FHFA offers to let Treasury convert its senior preferred shares to zero-dividend, non-cumulative preferred shares with stated value equal to the senior pref liquidation preference (currently around $273B for FnF combined) that automatically convert to a total of around a trillion common shares (not adjusted for a reverse split) upon sale to an outside party.
Treasury accepts, giving it essentially 99.9% of the common share base without having to worry about majority shareholder or balance sheet consolidation rules.
What stops Treasury from doing this to the juniors is the juniors' contract rights. Preferred shares can't be diluted, common shares can.
Consider this the conservatorship has lasted 15 years and both the common and JPS both have continued to trade. And the Treasury decides to take us out??
It's less about trying to take out current common shareholders and more about capturing all the common share value for Treasury rather than unnecessarily leaving any of it behind.
Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.
Wrong. All that says is Treasury does not have the right to convert the seniors. That language neither prevents FHFA from offering a conversion to Treasury nor Treasury from accepting it.
You might want to read further in the very document you linked to. Section 10(g)(ii) on page 7:
(g) The Company, by or under the authority of the Board of Directors, may amend, alter, supplement or repeal any provision of this Certificate pursuant to the following terms and conditions:
(ii) The consent of the holders of at least two-thirds of all of the shares of the Senior Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Senior Preferred Stock shall vote together as a class
This means that the Companies, at the direction of FnF as conservator, can make an agreement with Treasury to amend these stock certificates at any time. So even if Section 6 somehow did prevent a conversion (which it doesn't, because you clearly don't understand what a "right" is), it could be amended away if FHFA and Treasury agree.
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