morningstar

The dealer doesn't owe them money at any point in their business model; CCAC pays dealers. So writing off the Dealer Loan is writing off a cash liability, not a cash asset - waiting longer is more conservative. If CACC is going to lose money, it will be on the consumer loans where they are owed money by questionable counterparties, not on the Dealer Loans where they owe holdback to auto dealers.

Nice Catch - Nell. So let me understand this - they write off loans generally after 10 YEARS. This is totally nuts. So basically if writeoffs only occur after 10 years (perhaps 5 years after the borrow defaults then who knows what the earnings are. Wow. Who knows how long this one can go on. writeup on the writeoffs https://www.hvst.com/attachments/13770/Credit-Acceptance-Corporation_Thesis_11-Feb-18.pdf Borrowers basically never (cannot) default on Dealer Loans - the dealer effectively has no obligation to pay the money back. So I think this specific accounting practice means much less than you think it does. The important thing is the evaluation of the underlying Consumer Loans. The company's stated practice on that front is "We monitor and evaluate the credit quality of Consumer Loans on a monthly basis by comparing our current forecasted collection rates to our initial expectations." Variances then flow through the income statement on a quarterly basis.

They're planning to raise €7bn of new equity next month to fund the deal

Stock still trades including the spin off, so no impact on price yet

OCN has subservicing rights to some of the MSRs that NRZ acquired from HLSS. If there is a rating downgrade then they may have to move the servicing. Who will service that portfolio cheaper than Ocwen? There is also some language in their 10K , that the bondholders have an option to terminate subservicer and servicers. There are also excess MSR arrangements and maybe other arrangements where NRZ has potential counterparty risk to OCN - either where, upon OCN's bankruptcy, the OCN estate would attempt to prevent NRZ from exercising its rights over assets that are legally owned by OCN, or where a trustee could replace OCN as master servicer, rendering excess MSRs held by NRZ worthless.

how is trump going to find new shareholders to put up serious capital if the old shareholders are screwed? Same as with any other recapitalization or bankruptcy. I think that's a much harder sell. This isn't a typical bankruptcy/insolvency where shareholders hold responsibility for the management they put in place. This is instance where the government, in a crisis, took over control of the company under false pretenses and then unilaterally re-wrote the terms of the agreement of ceding control to screw the shareholders to the maximum amount possible even though hindsight showed shareholders never needed the government to step in to begin with. If the gov't can simply take a company into conservatorship based on concerns of what COULD happen, and then unilaterally turn that conservatorship into a liquidation when that company is still solvent and incredibly profitable, and then keep all those proceeds for itself without ever compensating shareholders, then you have a recipe for there never being a private solution to a crisis/potential crisis again. What shareholder is ever going to take the risk if the government can simply step in and renegotiate terms to sweep all profits to itself with no legal review whatsoever? What shareholder would step into such a politically polarizing company with the knowledge that the administration could simply steal it back at the next hint of any problems whatsoever. This really concerns me as a precedent for any future crisis, nationwide or company specific, where the gov't can simply absorb a company based on assumptions that never play out and never owe shareholders anything for it. I think the bulk of the global investor community would offer a very different account of events. The prevailing view, I think, is: FNMA/FMCC failed in about the most catastrophic way possible and were bailed out by the government (consistent with expectations that the government effectively guaranteed GSE debt). Economically, the equity and prefs were zeros. Had they simply been written off at the time, nobody would have blinked an eye (despite, according to your view, that being an even greater miscarriage of justice). But they weren't and a few hedge funds continue to fight a legal battle to recover a windfall gain. Should the GSEs get restructured into clean start capital structuers, there will be plenty of investors, same as there are in banks, insurance companies and so on - all of which exist with the understanding that the government has wide power to protect its guarantees. The risk of failing during a downturn widely applies to financial companies, and is accounted for in the required return on equity capital. EDIT: In my view, the much bigger challenge to finding new investors is the unsettled future of the company - I don't think new equity investors will be easy to find without either (1) successful GSE reform passed by Congress or (2) some tacit acknowledgement from Congress that there will be no substantial reform.

There's no expiration, although with quarterly volatility in earnings and no ability to retain capital, the GSEs would eventually hit the caps on facility size (sometime well after 2018).

The transaction was announced together with earnings that, on their own, would have seen the stock fall probably 80%, hence why the stock was down ~20% on the acquisition announcement. I think the deal is pretty likely to close, but the downside risk in the event of failure to close is enormous. Which is why shareholders would still likely approve the deal if Oceanwide cuts the price to the equity, in order to provide more cash onto the balance sheet (to be transferred to GLIC in exchange for unstacking the GLAIC entity). Cutting $1bn off the purchase price like in the WFC report seems like a big number, but it wouldn't surprise me if they need to find $200-300m to appease Delaware regulators.

The deal wasn't going to price anywhere near where they wanted it to; launched in the mid-8s, probably could have gotten the deal done between the mid-9s and 10% range but chose to withdraw instead.

http://www.swapsinfo.org/ This is what's available. SRAC CDS is much more liquid than SRAC bonds.

http://www.markit.com/converter.jsp HY CDS has a 500 bps coupon. The SRAC 1yr being quoted is the June 2017 maturity. Nate's figures are an annualized premium (spread). For instance on the 1yr if I sell protection on that quote I get 6 pts upfront + 5 pts of coupon over the 10 month life, which works out spreadwise to 1331 bps. The other side of the bid ask is 2099 bps spread. Nate's figure is a midpoint. On the long bonds / long CDS, SRAC is pricing to default so comparing YTM on bonds to CDS spread is not very useful - better to compare discount on the bonds to points upfront on CDS.

17 pts on Sears CDS?... Is that a midpoint, a trade actual, or... ??? Someone should tell that to their 9-12% YTM bonds... '17 - '32 are all in that range... Until one person can share (real) liquidity info on Sears CDS, I will continue to just suggest that something is not being interpreted correctly, or there is a ton of arb money on the table for those with an ISDA... Honestly, either way I'm cool. ;-) I don't have access to a Bloomberg... SRAC 5y CDS 31-34 pts upfront. Pretty consistent with the pricing on the long SRAC bonds. 1y CDS is quoted 6-11 pts upfront, basically consistent with the 2017 SRAC bond although that is illiquid.

FNMAS has a coupon floor of 7.75%, so it would be even better than that. The problem is the low likelihood of the coupon ever being turned back on. The biggest appeal of FNMAS/FMCKJ is liquidity - this explains most of why they trade at a premium, I think.

Supposing that a court agreed with this argument and gave preferred holders a damages claim for their liquidation value, and the FHFA responded by putting the GSEs into receivership rather than paying out in cash - where would that claim stand in ranking as that receivership carried on?

It seems to me that they aren't including any future returns and simply counting the $187.5 invested vs the $245.6 dividends to date. What a bunch of garbage. Are plaintiffs allowed to file another brief in order to reply to this nonsense? It's easy for us to notice the obvious error but I fear that non-finance people (the judges) will only see this at face value! Even a pretty generous assumption about the gov'ts future returns (say, that their current preferred is worth face and their warrants are worth the stock price) gets you a total return not inconsistent with equities over the period - I don't know that a group of hedge fund plaintiffs want to spend time arguing about what constitutes a windfall.