Fannie Mae-No Politics (FNMA)

[Forrest Gump Luck]

Google this text below.
I’m sick of this repeated fantasy about conversion of the seniors. They are not convertible.

“6. No Conversion or Exchange Rights.
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.”

That’s the seniors.
1. They prevent the company from issuing and new stock. This is to avoid dilution of the actual number of shares I. The event of warrant exercise. Keep in mind gov can sell the warrants without exercising them.
2. People hysterically selling the senior convention risk thesis will now start screaming about the liquidation preference.
“But the liquidation preference!!”
It is a liquidation preference. It is like a number 1 at the deli bankruptcy counter.
But the counter is not open unless there is a bankruptcy or receivership. Then why do they have it? They have it so government can restructure the organizations anytime they want, and we have a placeholder in case Congress wants to do something, they can.
Treasury can call the “FHFA we’ve decided that you are going to dissolve the companies in receivership.” The threshold for them doing this is nothing they can simply decide to do it because they feel like it. I doubt they will however.
But the liquidation preference doesn’t mean you can either have your money first in bankruptcy or just converted into shares it specifically says you can’t.