I've been invested in a few preferreds where the issuer went into 11. Some I lost almost everything, some I lost all and some had a full recovery. Unfortunately the one with a full recovery I sold when they filed :(.
I'm not sure the Prepack saves you much other than a quicker answer to whether you win or lose.
seanfar5 is right. And, even part of their assets are mark to market, the market is so inefficient that the price SFI got can be far off from the book. In a stock market, the identical shares are exchanged. In a mortgage and loan market, none of them are identical.
getting a few of the scraps of the new equity imo is the best that the pref will get in BK....could also be a wipeout, but maybe the bond bullies will throw em a few scraps to shut up the pref's lawyers...but the scraps will likely only be new equity and not div producing new prefrds
I have owned preferreds in/thru BK twice, MCI (through WCOM) and Northwest. The MCI's were a different situation in a sense because of the fraud/accounting lies and traded between 2.5 and 12 during the long BK process. NW, which had real asssets, were between 8 and 12 or so (long time ago) during the process. In both cases, however, the common was wiped out. That is what is hard to figure on this one (and I know it is rumor) - the SFI common is relatively stable/high if BK is a real possibility. Is it because they are talking 2011?
Istar really is a different beast than MCI/Worldcom etc.
A somewhat better comparison may be with General Growth Properties.
In any event, I'm into Istar with the unsecured bonds only - won't touch the common, and preferreds were sweet at $4, but $10 is too rich for me.
For what it is worth, the unsecured bonds haven't flinched with this report.
Common holders are often in denial.
Financials do worse in restructurings because a good credit rating is essential to be an ongoing entity. SFI may be different since it is not really in the lending business right now. Depending on how you look at it they are either in liquidation or converting to a property owning REIT. Credit rating doesn't matter as much.