BAC is asking LTC mgmt to go to the bond and prfd holders and in essence asking them to structurally subordinate themselves to the new credit facility. It is possible for those parties to agree if they believe it is in their interest to do so.
What does this mean? BAC does not believe in the valuation of assets to be there in the event of a downturn in healthcare again and are unwilling to do a refi w/o obtaining senior creditor status or as high as they possibly can.
As to your analysis of the MT situation. I am of the belief that debt will move from the healthcare side to the lodging side when all is said and done. Any debt moving to the lodging side will be seen as a huge overhang on the stock's ultimate valuation once this process is completed. It does not matter how much debt is being reduced right now...today. It is the debt load that LQ inherits from the healthcare side that is the name of the game right now. Until LQ can show what its ops will look like post healthcare no one is willing to put a solid NAV on the successor MT. There are a lot of well educated guesses but nothing solid until healthcare has been entirely disposed of. LQ is not exactly a primo asset and it was overpaid for given today's operating environmt.
Obviously there are some provisions in the prferrd arrangement that BAC is asking for some sort of subordination to. I have run across enough strange prfd provisions to know that this comes up every once in awhile where a prfd actually can hold itself superior to all new debt obtained for example. Clearly there is something there that represents a bug up BAC.
The other debt holders would only subordinate if they thought BK was an alternative worse than subordination to BAC.
Its a game of chicken right now.
Not all prfd equity holders are subordinate to all debt holders depending on what mgmt agreed to at the time they floated the prfd. REITs have found all sorts of new ways to float prfds I have never seen before in terms of Fortune 500 companies. Find out what those terms are and perhaps you can find out why BAC has a burr up its rump.