2) Treasury returns $125B to FnF and converts the seniors to commons (which crushes the existing commons into almost nothing) to recoup the outlay.
If seniors represent 80% of the company valuation and commons are 20%, after conversion both together is still 100% of the valuation of $125B plus everything F&F are as a business. Just the share of valuation is roughly ~$22 per common share. If its not I apologize but it would seem to be a long way from "almost nothing" and considerably more than $1.93.
kthomp19 - Never say never. Although the first choice you laid out appears to be the way we are headed - seniors cancelled but warrants exercised and a credit for about $30B (the middle ground and the quickest and most logical scenario) I would also look behind door #3 and not rule it out.
Treasury will never both cancel the seniors and return $125B, and no court can order both of these things. Even a win by the plaintiffs in Sweeney's court would only result in the $125B return. It wouldn't affect the seniors at all.
I think we all know a ruling could be a couple of years away but the election is not. The administration wants to set the recap and release in place before it may leave and make it hard to reverse. I can't see in any of the scenarios the seniors not being cancelled before the election. At that point both the common and juniors should take off. But unless there is a settlement in the meantime, the possibility of the return of the $125B would still exist. I do think they will settle before the election - but they may not - so choice number 3 is still very much in play.