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Thursday, May 16, 2024 10:42:56 AM
The carrot is a release and a projected post release valuation of FnF the JPS holders would deem lower than actual. This is analogous to what creditors angle for in bankruptcy reorganizations. For example, the government projects FnF's Newco Enterprise Value will be 10X earnings yet JPS believe they will trade at 12x (while arguing it will be less). The result of using a lower-than-actual Newco Enterprise Value is that the haircut may turn out to be not much of a haircut at all.
Legacy commons have near zero value because of the capital shortfall. There will be no windfall for legacy commons. The Newco Enterprise Value will determine any residual value to legacy commons. As mentioned above, JPS holders will be arguing for the lower end Newco valuation. So will any new investors that will be needed to fill any remaining capital shortfall. The only feasible avenue for release includes a full conversion of the SPS. A write down doesn't help with the capital requirements, a conversion does. Furthermore, new investors won't touch this unless the SPS are gone. All these factors add up to legacy commons ending up with virtually nothing, it just depends on what the size of the gift Treasury allows them, because that's what it will be.
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