Right, but everything rolls up to Grace Acquisition I Inc, which is ultimately what Whitehall owns. So yes, WNT Holdings now owns 97% of a subsidiary entity, Senior Mezz, LLC via the exercise of the warrant. The way all of the press releases read suggests this 97% is a common equity interest, which under the charter is still subject to a dividend blocker until the preferreds are brought current. The semantics behind the creation of the warrant, the purchase by WNT Holdings and simultaneous exercise are simply to extinguish the substantial amount of mezzanine debt that existed prior to the 2008 restructuring that would have otherwise had a priority cash flow claim to both the preferred and common equity. Given WNT Holdings is an SPE owned by Whitehall, the money is now fungible, so it doesn't really matter.
Two other points as well - if the shareholders get nothing, than PFD Holdings gets nothing. PFD Holdings is, again, a subsidiary of Whitehall. Why would Goldman throw good money after bad? IF their intent is to in fact eliminate the preferreds, they could have achieved this without injecting additional equity dollars into the transaction through PFD Holdings. IF PFD Holdings is truly an arms length entity and they do not receive consideration for their investment, wouldn't they seek to exercise any remedies available to them, including legal action? Very convoluted, I know, but I am just trying to make the argument as to why I believe this is simply a strategic discounted payoff of the preferreds. One could reasonably make the case that PFD's basis in the prefs is in the mid-single digits which would suggest that the preferred liability is now a self-funded liability. Said differently, if they pay themselves par plus accrued, they can pay themselves back their investment basis, pay off the remaining ~40% prefs at par plus accrued and still post a profit on those dollars.
Just some food for thought. Maybe I am way off, but this is the thesis that keeps me going.....
