Replies to post #7319 on Fannie Mae Preferred S (FNMAS)

[jmbell42]

Thanks Blue,

I realize that you re-posted that part from a previous post, but I assumed that, since you reposted it, that you agreed with the content of the previous post.

In that case, I was asking you, based upon your own analysis, under what legal scenario would junior preferred shares in a company be exchanged into common shares on a 1:1 basis.

Even in the event of a Ch 11 (which we are not in), the preferred shares will take the lion's share of what remains of the company's carcass after the debt-holders have their fill.

For a recent, well-publicized example, see the Wamu bankruptcy (I was drawn into that case by association with DIMEQ) and am familiar with the priority structures of company (but am by no means an expert in capital structuring of public companies).

Thus, I remain completely unconvinced that any FNAMS, or FMCKJ/L etc would ever be converted 1:1 into FNMA or FMCC commons. No one who has posited this scenario has provided a modicum of believable evidence based upon the current situation or cited a relevant example in the recent (or not recent) past. I eagerly await any research that has been done on this subject.

Very Best,

Jared