Bill Ackman's hedge fund-firm took stakes in Fannie Mae and Freddie Mac, the government-backed mortgage insurers that investor Bruce Berkowitz is seeking to restructure, and said it may seek talks with management, shareholders and the government.
Pershing Square Capital Management LP bought a 9.98 percent stake in the common shares of Fannie Mae and a 9.77 percent stake in Freddie Mac common stock, according to a government filing Friday. Pershing started buying the stakes on Oct. 7 and accelerated purchases after Oct. 21, according to the filing.
Fairholme Capital Management LLC (FAIRX), the mutual-fund firm run by Berkowitz, this week proposed buying two businesses that insure mortgage-backed securities from Fannie Mae and Freddie Mac to salvage a bet on the two government-backed companies. The U.S. government owns 80 percent of Fannie Mae and Freddie Mac, with Ackman holding almost 10 percent of the remaining common shares.
The proposal by Berkowitz, who is locked in a legal battle with the government over his investment in the two agencies, would more than double the value of preferred shares in Fannie Mae and Freddie Mac that Fairholme, billionaire John Paulson and other investors own.
Under Fairholme's proposal, the businesses would be acquired in exchange for about $34.6 billion in Fannie Mae and Freddie Mac preferred stock that Fairholme and investors including hedge fund-firms Paulson & Co. and Perry Capital LLC bought in a wager that the U.S. government would keep the mortgage companies alive. Fairholme's proposal would raise at least $17.3 billion in additional funds from preferred holders and through a rights offering, Fairholme said in a Nov. 13 statement.
Charles Zehren, a spokesman for Pershing at Rubenstein Associates, declined to comment on today's filing.
The government seized Fannie Mae and Freddie Mac after the mortgage-finance companies were pushed to the brink of bankruptcy by investments in bad loans. The two took $187.5 billion in taxpayer aid before reporting record profit this year as the housing market rebounded.