Replies to post #660634 on Fannie Mae-No Politics (FNMA)

[RumplePigSkin]

GAK - that is why this whole agreement is tee’d up for SCOTUS. The JPS folks fail to understand that SCOTUS will follow through to the end as getting cert is in the single digit percentages. They’ll off their opinion ...

[kthomp19]

I actually agree with you that the CS litigants will favorable welcome direct claim rewards of offered in a settlement, which would clear the litigation hurdle.

What I meant is that I think the individual common shareholder plaintiffs will accept cash in return for a settlement, leaving other common shareholders and even the companies themselves out in the cold.

The questions I have relate to the possibility of raising outside capital while C-ship and liquidation preference still remain.

Section 5.3(b) carries the clear implication that FnF will do their common equity raises in order to push them over the 3% "CET1" threshold where Calabria can release them without needing Treasury's approval. As long as common shareholders get generous enough dividends, which the capital rule (that today's agreement enshrined) allows for, they shouldn't mind being behind a mountain of senior pref liquidation preference. All that will do is serve to drive down the offering price.

The dividend on the Liq Pref is going to kill earnings power, even if they pay down $70B each through capital raises

I think you read that wrong. The first $70B of common shares each GSE sells doesn't pay off the seniors but instead actually accretes to capital. All capital raises after that are what have to go to Treasury to pay down the seniors. I can see investors putting in that $140B if they get enough equity and dividends to make it worth their while. I can't see any capital raises happening after that.