Fannie Mae-No Politics (FNMA)

[obiterdictum]

So here is another inference. When Berkowitz speaks of restricted capital at 34+ bill and new capital infusion at 17+bill he assumes a 100% participation of Jrs. Yet, in writing, he speaks of a "minimum threshold". So in reality, he is not sure and the 100% numbers are just "an aspirational goal", and an optimistic one. Not regarding the rights but Jrs. converting into common. The rights will likely be exercised in its totality as those who get them and decide not to take the offer (and pony up cash) will sell them in the open market to those who want. Although a few participants may forget about this and have their rights expire worthless (there is always someone). Otherwise, hedge funds will simply swallow them.

Another interpretation could be that the whole universe of preferreds participate mandatorily due to 2/3rds of a vote. But then, why would he speak of a minimum threshold?

Berkowitz is proposing a $52 billion investment and his concern is to obtain and deliver that amount. To do so, he needs the support of other preferred shareholders and new investors to reach that goal. He does not need to have 100% of the preferred holders participating as that would be an unrealistic goal. He is only required to have a sufficient number of preferred shareholders whose holdings will bring the amount of share to be converted and exchanged for common shares of the new companies ($34.6 billion worth) and 17.3 billion in new cash from preferred shareholders via their purchasing shares in a transferable rights offering or selling their rights to others to make the deal as promised.

We are very light on information regarding this rosen62 since we do not know who are the largest shareholders in his groupings and amount of their holdings.

We are left with his confidence that it can be done with existing preferred shareholders, some others who buy the transferable rights from preferred shareholders and a few vague referrals on how it will happen is all we have.

What is interesting is that this proposal generates an automatic gain of about 20 billion in cash and cash equivalents when the new companies acquire most of the operating assets and the entire restricted capital of the GSEs.