Fannie Mae Preferred S (FNMAS)

[5bagger]

Jr preferreds (white knights) got jr. pfd. and money to sue govt. Not worth trouble to un-do the c-ship for the common.

Plan strips away the jr. pfd. level to NewCo and leaves the common with EVERYBODY'S X-out scenario (wind-down, sell-off, run-off).

Issues that I see:
1, Biforcation of bonds - not so easy to startup

2. Common has no voice, so the FHFA 'voice' speaking for them will NEED to give them *some* value. Will they be happy? Who knows, but they better end up with something. More headaches and lawsuits.

3. CSS may not be ready for a while. End-game for jr. pfds. may also be a year away.... don't spend the profits, yet. No dancing.

4. Congress / FHFA / Obama / Press may scoff (some are already) at HF trying to make some coin.

I DO believe this places the honus on FHFA / TSY / Congress to create $34B in value for the jr. pfd.

I ALSO believe, as the proposal states, that there IS considerable value in the run-off. Recall jr. pfd. seem to be leaving the $9B capital behind for 80-20 split by govt. and common. Also, lawsuits would accrue (25 to 40B may be coming).

They state that it does need to go back to 10% dividend for the plan to work.

Whether it 'takes' or not, both the $34B is a baseline and return to 10% are good negotiating points for quietly calling off the dogs in court cases.

Go Bruce & Fairholme!