The way I see it, if the debt is exchanged for common equity, then it goes from standing in line in front of the preferred to standing behind the preferred.
If a deal cannot be made with the debt holders to exchange their debt for common, then liquidation might leave the preferred holders with nothing.
CIT preferreds (A &C)look to end up with 1% of the company in the exchange offer. From what I recall the proforma shows book at about $11 bil. So the $850 mil in preferreds will get about $110 mil in book value, or about 13 cents on the dollar = $3.25 a share. That is at one times book. A restructured CIT could sell at a premium to book. IF CIT files bK they appear to end up with some fractional residual value of some sorts. Probably warrants.
I am sitting on the fence on this one. Still don't see the reward for the risk and uncertainties involved. This new exchange offer makes me think the exchange/restructure offer will go through. I may buy a little just to play with but I am talking about less than $1500 worth and I will not be buying in any accounts I manage for others.
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