Replies to post #457174 on Fannie Mae-No Politics (FNMA)

[RickNagra]

A

[contrarian bull]

Draw was to get rid of the "deficiency". For determining "deficiency" the draw (and resulting increase in liquidation preference) is excluded by FHFA/Treasury. That's why they look at deficiency, not net worth However for actual net worth it shows up as a liability on the balance sheet, to offset the cash infusion. So the draw did not change their net worth - it was still negative.

It's kind of buried in all the documents, but one reference is in the Senior Preferred Stock Purchase Agreemend under "Definitions":

“Deficiency Amount” means, as of any date of determination, the amount, if any, by which (a)
the total liabilities of Seller exceed (b) the total assets of Seller (such assets excluding the Commitment
and any unfunded amounts thereof), in each case as reflected on the balance sheet of
Seller as of the applicable date set forth in this Agreement, prepared in accordance with GAAP;
provided, however, that:
(i) for the avoidance of doubt, in measuring the Deficiency Amount liabilities shall exclude
any obligation in respect of any capital stock of Seller, including the Senior Preferred
Stock contemplated herein


This is a good thing - it means they get to retain profits to offset the total negative net worth.

I don't think that's true. The whole point of the draw on March 30 was to get rid of the net worth deficiency.