Fannie Mae-No Politics (FNMA)

[The Man With No Name]

What I want to know is the inverse of the latter: is the formation of newcos the only way a bankruptcy re-org can happen?

If the answer is yes, and if is receivership the only way newcos can be formed that inherit FnF's charters, the juniors should be safe because I don't think receivership is a viable option. The juniors could be asked to take a haircut to facilitate the recap process, but they couldn't just be sidestepped.

Receivership and an associated Chapter 11 is definitely a viable option. That's one of the reasons why the JPS are trading where they're at. There are so many different ways to re-org the GSEs...I could spend hours writing about different scenarios. I will say this, the cleanest way is to quietly get 2/3s of all issues of the JPS to agree to a common conversion or a common w/warrants conversion. It's the same tactic companies use with bond holders when they prepare pre-packaged bankruptcies.

When or if that happens, there will be insider trading. The price action now tells me no one is talking.

If there do end up being newcos in the re-org, why would the juniors be offered any options at all?

To end litigation. Or alternatively, if the market determined the EVs of the companies put the JPS in the money.