Homebuilder Standard Pacific (NYSE: SPF) got its start in 1965 and benefited nicely from the recent housing boom in California. But, of course, the past couple years have been brutal. The stock has plunged from $22 to $3.50.

However, things got a little brighter today: MatlinPatterson Global Advisers LLC, a private equity firm, has agreed to invest $530 million into Standard Pacific.

It's definitely a leap-of-faith. In Q1, Standard Pacific sustained a loss of $3.34 per share or $216.4 million as revenues dropped from $651.1 million to $348.2 million.

Then again, MatlinPatterson will get some protection. For example, the firm is getting $382 million in senior convertible preferred stock (the conversion rate is at $3.05 per share). They will also get three new board seats.

The good news is that MatlinPatterson is a long-term player and understands the complexities of restructurings. What's more, they have more capital if Standard Pacific needs it, since the firm manages about $9 billion.

And so far, investors like the deal. In today's trading, Standard Pacific's stock is up over 63%.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.