Historical basis means much less than future return expectations. The bottom line is that the IRR will decrease the longer they hold onto a security that is returning on a yearly basis 8%.
Furthermore, the goal of a private equity fund is to realize a gain as quickly as possible because that's how they get paid. To suggest GS would prefer to retain the ARC preferreds to defer long term taxes all the while deferring their carried interest didn't make a bunch of sense.
If they were really concerned about taxes (taxes paid by the LPs, nonetheless) they works figure out a way to avoid paying ordinary income on the accrued dividends. I urge anyone to show me an analysis that there is enough value to cover par let alone the accrued.
Me thinks that Grace will pay the accrued, then pay a dividend to the equity holders with the remaining cash. Grace will get stuck with the ARC preferreds, the mezz debt and the Grace preferred.
If you don't think this can happen, after deferring the non-cummulative preferred SKRUF paid a one time dividend of $5m then paid out +$100m to the equity holders Mass Mutual & Cerberus.
