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Die Firma ist ein in New York City ansässiger Fonds, der auf Turnaround-Spekulationen spezialisiert ist. Der Text stammt aus dem Newsletter des Fonds für das 2. Quartal 2021 und enthält u. a. eine Bewertung des Scotus-Urteils zu Fannie und Freddie.
Third Avenue Management ist in FnF investiert (common und preferred). Die Positionen wurden 2020 gekauft (offenbar teurer als heute), jedoch im Vorfeld des Scotus-Urteils wegen des "hohen Prozessrisikos" teilweise reduziert.
Der Fonds rechnet mit einer adminstrativen Lösung, d.h. mit einer Freilassung von FnF auf Betreiben der US-Regierung. Er sieht auch gute Chancen für die noch ausstehenden Entschädigungsklagen vor dem Federal Court of Claims.
Besonders interessant ist ein Zitat aus der Analyse des Haushaltsausschusses (CBO) der US-Regierung zu einer administrativ initiierten Freilassung von Fannie und Freddie: Die US-Regierung will offenbar Anstrengungen unternehmen, die JPS zum Nennwert auszuzahlen - und dafür evtl. sogar einen "Haircut" auf ihre SPS vornehmen, falls die Mittel anderweitig nicht reichen. (unten im Text unterstrichen).
(fette Hervorhebungen und Unterstreichungen von mir)
finance.yahoo.com/news/...al-national-mortgage-163350716.html
"...The Fund also adjusted its holding in the Federal National Mortgage Association (“Fannie Mae”) during the period. As noted in previous shareholder letters, the Fund established a position in the preferred equity and common stock of Fannie Mae in 2020. It was Fund Management’s view that this enterprise (along with the Federal Home Loan Mortgage Corporation or “Freddie Mac” and collectively the government-sponsored entities or “GSEs”) was (i) a critical source of financing for sustainable homeownership and affordable rental housing in the U.S., (ii) among the most profitable real estate firms globally when measured by operating profits, and (iii) had securities trading at fractions of their underlying value due to the GSEs having operated under conservatorship since 2008.
Further, it was Fund Management’s opinion that the GSEs would ultimately exit this framework while further rebuilding capital as outlined in the Federal Housing Finance Agency’s (“FHFA”) Strategic Plan — a process that could be expedited once legal rulings addressed controversial changes to its Senior Preferred Stock Purchase Agreement (i.e., the “NetWorth Sweep”). However, given the significant “process risk” associated with such a substantial repositioning, the Fund would limit the amount of capital invested in the entities despite an unrivaled price-to-value proposition.
During the quarter, the Supreme Court of the United States (“SCOTUS”) issued orders relating to two of the legal challenges outstanding. In Collins v. Yellen, SCOTUS upheld the plaintiffs’ claims that the conservatorship was unconstitutionally structured, remanded the case to the Fifth Circuit of Appeals for potential “retroactive relief”, but declined to deem the entire Net-Worth Sweep void through this particular constitutional claim. While this order fell short of providing outright relief, other challenges relating to “The Implied Covenant of Good Faith and Fair Dealing” and a “Takings, Illegal-Exaction, and Breach-of-Implied Contract Claim” remain ongoing in District Court and Federal Claims Court, respectively. These cases have yielded important discovery and will progress through the remainder of 2021.
Notwithstanding a more extended timeline, Fund Management continues to hold the view that administrative action would be the most prudent path forward. Put otherwise, recapitalizing the entities and releasing them as quasi-utilities with enhanced capital ratios accomplishes key objectives. This primarily includes (i) moving the U.S. taxpayer out of the “first loss position” for the $6.5 trillion of mortgages the entities guarantee, (ii) providing more stability and capital for the enterprises to pursue their mission of promoting affordable housing, and (iii) respecting property rights while also preserving value for GSE stakeholders (including the U.S. Treasury).
Such a plan has recently been populated in the Brookings Institute Report: Government Sponsored Enterprises at the Crossroads. It is also one that has been carefully assessed by the Congressional Budget Office (CBO) in its Effects of Recapitalizing Fannie Mae and Freddie Mac Through Administrative Actions. As noted within this analysis, “CBO’s model incorporates the judgment that in scenarios in which the GSEs’ common-stock sale did not raise enough funds to redeem the full face value of both the senior preferred and junior preferred shares, the Treasury would take a reduction in the value of its senior preferred stake before requiring junior preferred shareholders to do so.”
When factoring in all of these items, as well as the pricing anomalies throughout the capital structures, the Fund’s remaining investment in the GSEs is now exclusively focused on the preferred equity. At the end of the quarter, these holdings accounted for approximately 2.0% of the Fund’s capital and the securities traded at prices that represent less than 10% of their Liquidation Preference (e.g., “par value”). Meanwhile, the entities remain quite profitable and are rebuilding significant capital while the matters are addressed."
Third Avenue Management ist in FnF investiert (common und preferred). Die Positionen wurden 2020 gekauft (offenbar teurer als heute), jedoch im Vorfeld des Scotus-Urteils wegen des "hohen Prozessrisikos" teilweise reduziert.
Der Fonds rechnet mit einer adminstrativen Lösung, d.h. mit einer Freilassung von FnF auf Betreiben der US-Regierung. Er sieht auch gute Chancen für die noch ausstehenden Entschädigungsklagen vor dem Federal Court of Claims.
Besonders interessant ist ein Zitat aus der Analyse des Haushaltsausschusses (CBO) der US-Regierung zu einer administrativ initiierten Freilassung von Fannie und Freddie: Die US-Regierung will offenbar Anstrengungen unternehmen, die JPS zum Nennwert auszuzahlen - und dafür evtl. sogar einen "Haircut" auf ihre SPS vornehmen, falls die Mittel anderweitig nicht reichen. (unten im Text unterstrichen).
(fette Hervorhebungen und Unterstreichungen von mir)
finance.yahoo.com/news/...al-national-mortgage-163350716.html
"...The Fund also adjusted its holding in the Federal National Mortgage Association (“Fannie Mae”) during the period. As noted in previous shareholder letters, the Fund established a position in the preferred equity and common stock of Fannie Mae in 2020. It was Fund Management’s view that this enterprise (along with the Federal Home Loan Mortgage Corporation or “Freddie Mac” and collectively the government-sponsored entities or “GSEs”) was (i) a critical source of financing for sustainable homeownership and affordable rental housing in the U.S., (ii) among the most profitable real estate firms globally when measured by operating profits, and (iii) had securities trading at fractions of their underlying value due to the GSEs having operated under conservatorship since 2008.
Further, it was Fund Management’s opinion that the GSEs would ultimately exit this framework while further rebuilding capital as outlined in the Federal Housing Finance Agency’s (“FHFA”) Strategic Plan — a process that could be expedited once legal rulings addressed controversial changes to its Senior Preferred Stock Purchase Agreement (i.e., the “NetWorth Sweep”). However, given the significant “process risk” associated with such a substantial repositioning, the Fund would limit the amount of capital invested in the entities despite an unrivaled price-to-value proposition.
During the quarter, the Supreme Court of the United States (“SCOTUS”) issued orders relating to two of the legal challenges outstanding. In Collins v. Yellen, SCOTUS upheld the plaintiffs’ claims that the conservatorship was unconstitutionally structured, remanded the case to the Fifth Circuit of Appeals for potential “retroactive relief”, but declined to deem the entire Net-Worth Sweep void through this particular constitutional claim. While this order fell short of providing outright relief, other challenges relating to “The Implied Covenant of Good Faith and Fair Dealing” and a “Takings, Illegal-Exaction, and Breach-of-Implied Contract Claim” remain ongoing in District Court and Federal Claims Court, respectively. These cases have yielded important discovery and will progress through the remainder of 2021.
Notwithstanding a more extended timeline, Fund Management continues to hold the view that administrative action would be the most prudent path forward. Put otherwise, recapitalizing the entities and releasing them as quasi-utilities with enhanced capital ratios accomplishes key objectives. This primarily includes (i) moving the U.S. taxpayer out of the “first loss position” for the $6.5 trillion of mortgages the entities guarantee, (ii) providing more stability and capital for the enterprises to pursue their mission of promoting affordable housing, and (iii) respecting property rights while also preserving value for GSE stakeholders (including the U.S. Treasury).
Such a plan has recently been populated in the Brookings Institute Report: Government Sponsored Enterprises at the Crossroads. It is also one that has been carefully assessed by the Congressional Budget Office (CBO) in its Effects of Recapitalizing Fannie Mae and Freddie Mac Through Administrative Actions. As noted within this analysis, “CBO’s model incorporates the judgment that in scenarios in which the GSEs’ common-stock sale did not raise enough funds to redeem the full face value of both the senior preferred and junior preferred shares, the Treasury would take a reduction in the value of its senior preferred stake before requiring junior preferred shareholders to do so.”
When factoring in all of these items, as well as the pricing anomalies throughout the capital structures, the Fund’s remaining investment in the GSEs is now exclusively focused on the preferred equity. At the end of the quarter, these holdings accounted for approximately 2.0% of the Fund’s capital and the securities traded at prices that represent less than 10% of their Liquidation Preference (e.g., “par value”). Meanwhile, the entities remain quite profitable and are rebuilding significant capital while the matters are addressed."
