Replies to post #550457 on Fannie Mae-No Politics (FNMA)

[kthomp19]

FNMA needs to refinance its long term JPS debt.

The juniors are not debt, they are equity. They are even non-cumulative so they count towards core capital.

Issue new JPS at a lower % rate.

Cost to service to loan goes down.

Pay off all JPS with the new JPS Debt.

Simple.

Possible, but converting the juniors to commons and then issuing more is even better.

1) Issue $33.2B of new prefs to redeem the existing ones. Net effect on core capital: zero.
2) Convert existing juniors to commons and then issue $33.2B of new prefs. Net effect on core capital: +$33.2B.

The second is clearly better for FnF at a time they need to build capital.

I can tell that the prospect of a conversion distresses you, but that doesn't warrant posting incorrect information and wishful thinking scenarios that are worse for the companies than a conversion would be.