Read on Twitter
Predictions for all of these PSPA amendment items, keeping in mind that I am just an anonymous retail investor w/ no real connections in housing, govt. or equity/policy research & everyone's GSE reform prediction are usually wrong... (1/15) https://twitter.com/HoldenWalker99/status/1344647942448291841
1) NWS – variable/10% div. ends [>90% probability] or just a new Letter Agreement [<10%]; if just a LA, ignore the rest of this thread b/c we lost 
; the SCOTUS/litigation safety net still requires admin. action for this to work which would be min. 4 more yrs. (2/15)
; the SCOTUS/litigation safety net still requires admin. action for this to work which would be min. 4 more yrs. (2/15)
2) SPS/liq. pref. conv./elim. ($229B QUESTION!) - range is both remedies sought by Collins Ps: (A) return of $125B NWS payments above 10% (also remedy in Court of Claims Ps) w/ SPS remain. & (B) full write-down w/ “10% moment” treat. & $30B credit to GSEs for overpayment (3/15)
(A) forgives retro. commit. fee – allows paydown & write-down SPS to ~$70B ($193B SPS minus $125B overpayments) then convert to common at FMV or non-cum. JPS [this is what I would do, make it so NWS never happened & require/allow paydown going forward] (4/15)
(B) involves payback not currently allowed in PSPA & government giving $30B credit to GSEs; IMO there is a nearly 0% chance of this happening b/c it involves the govt. giving the most favorable outcome to Ps & amending the PSPA to allow payback w/o anything in return (5/15)
Comprise would be to allow payback but in exchange for retro. commit. fee; start at $30B credit & back out retro commit. fees; more here: https://twitter.com/HoldenWalker99/status/1336505680367333376 (6/15)
3) LOC/commit. fee – current LOC $FNMA $234B & $FMCC $212B, FMCC should be “tailored” to 75% of FNMA based on assets/cap. reqs.; range is $174B combined (aligns to reg. min., so reg. min.+LOC is ~8% assets) to ~$400B (FNMA unchanged & FMCC adjusted) (7/15)
Commit. fee should be 25-50bps once adequately capitalized but up to 200bps until GSEs hit milestones; this could be up to $8B annually (!) out of the gate so will incentivize quick recap. to hit milestones that reduce the fee (8/15)
4) CO framework/timeline – CO is FHFA/GSE issue but UST impacted, therefore, I’d expect some language to support CO & timeline for recap.; ACG nails this with the 4-year window by 12/31/2024 IMO (9/15)
5) Section 5.3 – may not apply if there is no SPS outstanding, but the commitment was initially based on $1B SPS; if that is eliminated, no UST approval needed for release; if remains, UST “pre-approval” required or punts to Yellen for final release (10/15)
6) Caps (e.g., multifam. bus., ret. port.) – I suspect that the scope of multifamily will decrease significantly in the GSEs going forward; retained portfolios will be reduced further; scope will be narrowed to core mission but may change as capital increases (11/15)
Other) I forgot about the warrants, because the probability of exercise is so high that I view them as less important than the aforementioned issues. This will be incl. in PSPA amend. also to set share count/govt. stake before GSEs access capital markets (12/15)
What's next?
Treasury: Work is mostly done. Sec. Mnuchin will not settle litigation or negotiate w/ existing shareholders. This deal is "take it or leave it" and I expect plaintiffs to "take it" & drop suits. If not, it's up to GSEs/FHFA to resolve. (13/15)
Treasury: Work is mostly done. Sec. Mnuchin will not settle litigation or negotiate w/ existing shareholders. This deal is "take it or leave it" and I expect plaintiffs to "take it" & drop suits. If not, it's up to GSEs/FHFA to resolve. (13/15)
FHFA: FHFA will work quickly w/ GSEs & their FAs to finalize/socialize recap. plans. Every day that passes is another day that the undercapitalized GSEs keep taxpayers at risk. Expect 1st equity offering (public or private) by the time that SCOTUS decides Collins. (14/15)
What happens to JPS & common on "PSPA Day?"
JPS should trade 60%+ of par if no conversion but get better clarity very quickly, within weeks IMO.
Common should trade higher in most scenarios & could rip above $5, which would be unwarranted IMO, but whatever.
Good luck. (15/15)
JPS should trade 60%+ of par if no conversion but get better clarity very quickly, within weeks IMO.
Common should trade higher in most scenarios & could rip above $5, which would be unwarranted IMO, but whatever.
Good luck. (15/15)
