My take on pref conversion to common is a non issue:
-if indeed all direct claims denied, no legal route for any conversion, it becomes a government decision, with they have little incentive to make.
-Government is charged with "preserving and conserving assets", a conversion would be giving away company assets and would create dilution chaos, so no new investors would want in if government allows share dilution via conversion.
-The government has absolutely no reason to make pref's or commons happy or whole, its been said. The only way this happens is via the conservator doing his job. Commons will benefit indirectly through share value increase, pref's only return to their interest payment if turned on later, when the companies meet their capital rule and other guidelines set by conservator. Courts will have affect on commons way more than prefs. (TBD)
-pref logic that the conservator and courts need to settle with them first and foremost does not hold any water in the restructuring taking place, only in liquidation do they get preferential treatment, hence the securities name, preferred's.
-pref's are in denial that their shares are dependent upon the actual overall health of the business. This is why interest on pref's can be withheld until determined AFTER the corporations are put into sound solvent condition.
-Commons benefit as the company moves forward, not directly (unless courts rule this way somehow), but derivatively as the business builds and prospers. Common Shares are speculative, which are priced based on investor perceived value. If pref's are perceived to be "on hold" for whatever amount of time, for their interest payments, the security will be priced accordingly by the market. If commons are perceived to have upwards potential, then the market will price accordingly.
Neither pref's or commons will have any direct impact on each other if this conservatorship is done correctly. They had no impact on each other going into it. Both are very different in their use and treatment by companies.
So, conversion has about as much chance as liquidation.
All my honest opinion.
