<<It would be great if they could buy it back themselves for less than book value.>>
I do cherish the thought, but I think it unlikely. GFED requires approval from regulators to buy back in the amount that also satisfy capital adequacy requirement, 2Q result did not help.
Whether in Treasury's hand has no bearing on the bank. It's not in arrears, or preferred holders may get to sit on the board.
The buyer stand to make good money. You can't get 5% return on any 12 months debt instrument. Much has changed in the real estate market since May, the preferred could well fetch a premium. One reason is that risk of early payment went down.
Not sure on all the specifics, but I would assume the dividends will remain the same. I read the article as well, and it said the auction will end on Thursday evening. Hopefully GFED will offer a press release after this is over outlining the specifics.