The Fairholme Fund has announced that it is filing suits this week in both the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia to protect its rights as an owner of preferred stock in Fannie Mae and Freddie Mac, including the right to receive dividends from the profitable companies.
“Fannie Mae and Freddie Mac are rapidly repaying the government,” said Bruce R. Berkowitz, Managing Member and Chief Investment Officer of Fairholme Capital Management. “Their success should surprise no one given the value of Fannie and Freddie. Once the government has recouped its investment, The Fairholme Fund—on behalf of our shareholders who are predominantly individual Americans with an average investment in the Fund of $43,000—is owed a contractually specified, non-cumulative dividend for its investment in these companies. As solvent, highly profitable companies, Fannie and Freddie should honor all outstanding obligations to their investors.”
Fairholme’s actions do not challenge the 2008 emergency investments by the Government in Fannie and Freddie. Instead, Fairholme is contesting the August 2012 “Net Worth Sweep” that attempted to change the rules of priority.
“Fairholme’s objective is quite simple,” said Berkowitz. “The government set the terms of their 2008 investments and should be held to their original deal.”