What would be the repercussions if C or BAC did start deferring the interest on all their existing prfds? 1. Interest savings would help TCE (and other) capital ratios. 2. Credit rating - I assume it would be sharply lowered but then again these are prfds, and not real debt instruments. 3. Common might even be helped (see point #1). 4. Stigma and affect on reputation......priceless
I'm thinking (and hoping) that point #4 will be the determining factor.
Deferral of any preferred interest payment will have a short term cash benefit, but will damage long term ability to raise capital since interest rate demand and collateral will be much higher, if not impossible to obtain. The public is finding out that bankers and company execs are really dumb arses, in cheap suits