Commons are going to zilch, get over it. Preferreds may end up the same.
Just to make sure, by "zilch" for the commons you mean near zero and not actual zero, right? It might seem like semantics but for the juniors there's a huge difference. If the commons don't go all the way to zero (only near it via dilution), the juniors should be able to just sit on the sidelines and eventually claim their stated value.
My understanding is that, while the juniors are currently impaired, the only way for a haircut to be forced on them in a restructuring is if FnF's assets and liabilities are transferred to newcos. But the charters cannot be transferred in any way other than receivership, which causes all sorts of unnecessary problems of its own. And any sort of newcos that don't inherit the charters would be useless for the housing finance system.
I think the charter issue is what separates FnF's restructuring from more standard Chapter 11 proceedings. If the companies must exist in their current form post-restructuring, there shouldn't be a way to force the juniors into taking a haircut. Only strong incentives, such as actually unlocking (most of) the value of their shares rather than the limbo we are currently in.
The Trump administration actually tried to get this done but failed. Even if Biden's administration tries as well they could also fail. A runway of up to a decade from now is unfortunately possible.
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