Replies to post #784246 on Fannie Mae-No Politics (FNMA)

[sortman]

Public companies convert debt into equity all the time massively diluting their early shareholders. That is just what the gov will do. Convert their debt into 80 billion shares. And the companies will sell 20 billion shares to get the capital up to 200 billion. Gov then owns 80% they can sell for low income housing over the next 10 years.

[sortman]

Public companies convert debt into equity all the time massively diluting their early shareholders. That is just what the gov will do. Convert their debt into 80 billion shares. And the companies will sell 20 billion shares to get the capital up to 200 billion. Gov then owns 80% they can sell for low income housing over the next 10 years.

[Donotunderstand]

interesting recap

Using my one post for the day

It can not be 1Billion shares at 1,000 per share --- that is - I think one trillion?

Re the LP --- I think of it as a "counter" of the value of the Senior Preferred Stock owned by GOV. A "counter" is needed - as I understand it - because the # of SP shares does not change and there is no trading in those shares so its "market value" is basically its starting point .

So lets say the starting point - and missed dividends UNTIL the companies kept cash is 200B. Now the companies hold back cash of 100B and the LP which is the value of the senior preferred shares goes up 100B

That gives - (not an accountant) - the GOV an equity ownership (not loan ) of 300B. The assumption of hell for commons is that as Preferred stock and senior preferred - and likely some documents - the GOV can exchange that form of equity (SR !) to common equity. If that is true - then such exchange of SR PRFD paper for more shares of common would SWAMP us with the GREAT FLOOD of new common shares - tons and tons. (As an aside - right or wrong !! - the WTS are a 4:1 dilution of a $100 PPS stock --- where the LP?SP conversion to common has been noted as say 100:1 dilution ---- which is why I do not sweat the impact of WTS ---- IF the cost of swallowing warrant execution is the wipe out of the 100:1 dilution monster - the SR Equity ----- (Think exchanging one form of equity for another - at the wish of the SR paper. It being SR Paper - likely of a type never court tested - is why I am not sure JPS can avoid some similar dilution). SO IMO - not an accountant - the SR PAPER can wipe out both with GOV owning 99.9% . Again - not a prediction and not saying it is just or correct . I am worried that it is a possibility

[Rodney5]

“ Can somebody remind me of the scenario whereby Fannie Mae is released from conservatorship and the Commons get screwed? ”

Rodney5
11/16/23 8:23 PM
Post #774859 on Fannie Mae (FNMA)
Information for anyone new on this board concerning the ‘Cram-Down’ argument.

There are certain people that are encouraging theft, these people want the Treasury Department to wiped out the Common Shareholders, referred to as Legacy Common Shareholders. Not only do these people want the Owners of Common Stock destroyed but take great links in rejoicing of the destruction of the Common Shareholders and consistently for many years have advocated this theft.

Transfer of Ownership Cram-Down

Explained,

Legacy Shareholders means, collectively, each person that owns common stock of the Company immediately prior to the closing of the Transaction (cram-down) which in no event shall include any of the Investors; or very few will remain afterwards maybe 1% or less.

A cram-down deal refers to a situation where an investor or creditor is forced into accepting undesirable terms in a transaction or bankruptcy proceedings.

In the case with Fannie Mae the Treasury's holding of senior preferred stock in the amount of $120.8 billion, with a liquidation preference of $190.5 billion.

If the Treasury converts this amount of SPS into common stock the Treasury in essence will own 99.9% of all the common stock outstanding. The number of shares outstanding depends on price per share at the time converted. The amount of shares outstanding after the cram-down does not matter at all, it's the percent ownership, a transfer of ownership from the legacy common shareholders to the Treasury. This transaction will cause the legacy common stock to vanish along with any short positions, naked short positions as well as any counterfeit common stock outstanding. Afterwards, the Treasury can do a reverse split reducing the amount in number of the new common stock outstanding to any amount outstanding the Treasury decides.

[Rodney5]

Rodney5
11/16/23 8:47 PM
Post #774861 on Fannie Mae (FNMA)
The cram-down people pushing to wipeout the common, it may BACKFIRE in their face.

Treasury restructuring explained below in two different ways, but not limited to the two.

The Treasury can choose to declare the Liquidation Preference paid in full and cancel the Senior Preferred Stock.

Or

What makes the JPS so sure the Treasury will not demand payment in full on the Liquidation Preference wiping out both JPS / Common in receivership?

The Treasury’s LP continues to grow the regulator is authorized or required to place the companies into receivership under specified conditions, which would result in our liquidation. Money received by the Treasury pays off the LP by confiscation of our companies. Leaving nothing for JPS or Common.

As we speak the value of the LP is greater than the entire business operation of Fannie and Freddie.

Company’s Financial Statement
Risk Factors Summary
GSE and Conservatorship Risk

Quote: "Our business activities are significantly affected by the senior preferred stock purchase agreement. Our regulator is authorized or required to place us into receivership under specified conditions, which would result in our liquidation. Amounts recovered by our receiver may not be sufficient to pay claims outstanding against us, repay the liquidation preference of our preferred stock or to provide any proceeds to common shareholders." End of Quote Page 33

Link: https://www.fanniemae.com/media/46276/display

"In the event the assets legally available for distribution to stockholders are insufficient to pay the liquidation preference of all Preferred Stock in full, the assets available for distribution will be divided among all holders of Preferred Stock on a pro rata basis, based on the value of the liquidation preference of each series of Preferred Stock." Page 5

Link: https://www.sec.gov/Archives/edgar/data/310522/000031052220000121/descriptionofsecuritie.htm

[kthomp19]

Can someone explain to me even you Bradford like I’m five how without a bankruptcy, the liquidation preference matters?

FnF are already in administrative bankruptcy (conservatorship) and have been for over 15 years. In an exit from bankruptcy, both placement in the capital stack and the amount of liquidation preference are of enormous importance.

How does the common get diluted, except in the event of a bankruptcy or wind down?

Can somebody remind me of the scenario whereby Fannie Mae is released from conservatorship and the Commons get screwed?

Some combination of:

1) Treasury converts the senior prefs to commons
2) Treasury exercises the warrants and FHFA offers the juniors a conversion to common
3) FnF do a capital raise, diluting the existing common