I tripled my preferred holdings 2 weeks ago, so I'm content, but I do have a theoretical question for preferred owners - doesn't the tender offer actually weaken our position within the corporate structure from a credit point of view? As unsecured debt gets swapped for secured instruments, a lesser amount of assets remain available to support preferreds in a worst case scenario... In theory, we become closer to common holders than debt holders within the corporate structure... Of course, this is only relevant should things go wrong, but still, theoretically, the swap doesn't benefit preferred holders except to the extent it strengthens SFI itself...Not ocmplaining, mind you...It's what we all wanted SFI to do. It's this flexibility and ability to take advantage of the circumstances that got me involved in SFI... It's my love of using belt and suspenders at the same time that got me to use preferreds as my chosen vehicle to participate in SFI...Yeah, I know, Ed, I know... but this was started as a preferred thread.... lol
The effect of the tender and swap on the preferred is that (1) $340 Million of debt has been eliminated and that (2) $640 million of debt has been extended a year or two. This is all good as far as the preferred is concerned.
Also, Quad is correct: It doesn't matter whether the SFI debt is secured or unsecured, all the SFI debt was already at the corporate level and was superior to the preferred. (The analysis might be a little different at other issuers where taking debt out of a CDO and providing a parent guaranty might push the equity down).
Good point... So to the extent the swap and open market buys of debt reduce the total amount of debt outstanding, we all beneift... Thanks for another ray burning through my brain cloud. And while I'm at it, Quad, it was your participation on this board that made the difference in my willingness to get involved in SFI in the first place. I am still one who is pretty much unwilling to commit much of my capital to this market, but I did want to get involved and/or stay involved in those beat up areas that would have to recover and recover drastically should the economy actually just even find a bottom. That led me to commercial REITS, financials and the like as a way to stay in while for all practical purposeses staying out. I discovered SFI from quantumonline, did my research and then checked out this board. I have never seen another board so knowledgeable, willing to share knowledge, and, for the most part, tolerant of contrary opinions. You have led the pack. You have been willing to share your knowledge and, above and beyond that, been willing to answer questions brought up by just about all who ask. And always with a willingness and humility to admit you could be wrong. LOL.... I"m sure I'm not alone in saying THANK YOU.