Replies to post #524571 on Fannie Mae-No Politics (FNMA)

[YanksGhost]

My comment on bankruptcy referred to Doc's message to which I replied and was the context in which he stated his view. I agree with you. I disagree with him.

[kthomp19]

In a Receivership the warrants do have value to the tune of 80% of settlement value of the sales of all assets of FnF.

Not really. The warrants give 79.9% of this money after all debtholders, senior preferred equity holders, and junior preferred equity holders have been made whole. Common shares stand at the end of the line.

It wouldn't take excessive losses to force Receivership, so market value of assets would be substantial and 80% would go to holders of the Warrants, thus assuring taxpayers would not have their interests wiped out, at the expense of equity shareholders by dilution.

If FnF go into receivership right now, they only have $6B in capital (excess of assets over liabilities). The seniors' liquidation preference of $193B would absorb all of that, leaving nothing at all for common shareholders, including Treasury with its warrants.




Yank's statement was correct. In the case of both bankruptcy and receivership, the warrants are worthless. The seniors' massive liquidation preference makes sure of that.