Obviously this is an investment I regret, but would it make sense to sell or wait and see? What would a bankruptcy look like for the Preferred shares, my understanding is they're not convertible to stock.
Well first the bondholders and secured debt gets paid. Whatever is left would first go to the preferred and then finally the common. But that is assuming a liquidation. Under a reorganization the priority would remain but the share structure could change.
The real question is do the assets exceed the debts? If they do a liquidation may actually be beneficial to all. I don't understand why the company is triggering a potential default when they have more than enough cash to cover the next interest payment. All they are doing is putting pressure on themselves in selling assets if that was one of their options. On the other hand they could be doing this to put pressure on the bondholders to restructure more favorably to the company.
If you think the assets exceed $500 million (the cost of the debt plus buying out the preferred) then you have a nice opportunity to gamble on the preferred. If not then salvage what you can and move on.
That's the real rub here. I genuinely think assets exceed debts, and I know Preferred are in front of common shareholders, but I have no idea how it's all going to shake out.
I sold some earlier, and my average buy in price is something like $13. I'm kicking myself because I was just about to get out a few weeks ago. I've made a good amount on the note payments, and I was hoping to ride it out.
The Preferreds are such a small part of the debt, I thought it would have been a stupid move to stop payment on them, but now that this Rubicon with the bonds has been crossed has been passed, I'm not sure what to do.