RumplePigSkin - I never said this would happen soon. Your right, a lot of things happen first. As I have said before, the fait of commons and preferred are joined at the hip - especially for those of us that have enough faith in a positive future for the GSEs to own both.
The last six words are the fallacy in your thinking. It makes the implicit assumption that recap and release is possible with or without a pref-to-common exchange. However, only one of the two will happen, so they cannot be compared to each other. Any pref-to-common exchange will not be at the expense of common shareholders because it will likely be a condition of recap and release.
The only comparison to make is between the status quo and recap/release with the share exchange. The commons should gain money moving from the former to the latter.
FnF are rather severely undercapitalized (Calabria talked about a 240:1 leverage ratio just this week). "Distressed" describes FnF rather well.
The exchange happening soon is not important, only that it is certain to be advantageous to holders of the juniors.
I agree, with the caveat that the re-IPO investors will likely insist on exchanging the juniors for commons before the re-IPO, putting the share exchange on level with the re-IPO (which should be in the top 4, along with SPSPA amendment, capital rule, and seniors gone).
I sure hope you're not making the implicit assumption that the common price would have to go up as things are leaked. It could easily go down or stay the same.
The best example of this is if word of an imminent pref-to-common share exchange leaks. At that point, big-money investors will short the common and use the proceeds to buy prefs as an arbitrage play. The very act of doing so would push down the 20-day average price (which is most likely the conversion price).
I agree. However, the pref-to-common exchange will be done before release, so the boards won't have a say at that point.
They might support the exchange anyway, since the alternative is most likely no recap and no release.