Replies to post #624142 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Doesn't the SPS agreement prevent capital stock issuance without putting those proceeds towards paying down the liquidation preference first.. which is ALOT >200B e.g. you cannot raise capitol with seniors existing in their current form.

Correct. The seniors must be gone before capital can be raised, whether written down/extinguished or converted to commons. Both of these add $193B to both core (tier 1) and CET1 capital, which currently stand at -$167B and -$200B respectively.

Is that the new SPSA amendment that you mentioned, which everyone expects to revert to the 10% dividend...

Yes, I expect the SPSPA amendment to get rid of the seniors once and for all, though perhaps the original $1B liquidation preference could stay because I believe the funding commitment (which needs to stick around per the presidential memo) is tied to the seniors. The 10% dividend won't matter any more once the seniors are gone, though.

So should 125B get returned for over-payment (admission that the debt is repaid in full) how do warrants ever be excised when they exist as a guarantee to repay the debt? Once warrants are exercised, the debt it cancelled... which already would not exist

The warrants are not tied to the seniors other than that both were issued in the original SPSPAs.

FnF's "repayment" of the seniors plus 10% has nothing whatsoever to do with the warrants. Tying the two together is a very prominent bit of common nonsense.

The idea of the warrants being collateral fails anyway, because if FnF were in enough trouble that they couldn't repay the seniors, the commons (and thus the warrants) wouldn't be worth anything. The warrants are not and were never intended to be collateral.