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Corrections Corporation of America Message Board

  • oystergrouch oystergrouch Mar 27, 2004 12:54 PM Flag

    OT: Texas Utilities

    Anyone here from the Dallas - Fort Worth area? I'm thinking of buying TXU_Pd (a convertible yielding 10%. The company went thru a disastrous year or two but now is on the mend. My concern is the water shortage. Is it bad enough to threaten industry health? Is too little water a long term problem? I was told the water comes from wells, but I remember reading that it pipes some water in from a distant river.
    If wells, are they running dry? If the Mississippi, I'm on easy street. So many knowledgeable people on this board........that's why I'm asking here.

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    • oystergrouch:
      The yield on that paper is for a reason, here is a description:
      ""SECURITY DESCRIPTION: TXU Corp., 8.125% FELINES PRIDES, stated amount $50 per unit, initially consisting of Income PRIDES which include a stock purchase contract and a 5.8% senior note with a principal amount of $50. The purchase contract requires the holder to purchase for $50 a variable number of shares of TXU Corp. (NYSE: TXU) common stock no later than 5/16/2006 and pays a contract adjustment rate of 2.325% per annum. The purchase settlement rate will be 0.7947 shares per unit if the then current market price is equal to or greater than $62.9145 and 0.9775 shares per unit if the market price is equal to or less than $51.15. For market prices between those values the settlement rate will be $50 divided by the market value. The last sale price of the common stock on 5/30/2002 was $51.15. The senior note is due 5/16/2008 and is subject to reset and remarketing on the third business day prior to 11/16/2005. The Income PRIDES pay quarterly distributions of 8.125% ($4.0625) per annum on 2/16, 5/16, 8/16 & 11/16 to holders of record one business day prior to the payment date while the securities remain in book-entry form. The senior notes are pledged as collateral to secure the holder's obligations under the stock purchase contract. The holder has the right at any time to convert the Income PRIDES to Growth PRIDES by the substitution of a specified zero-coupon U.S. Treasury security for the senior notes and to later recreate Income PRIDES. The senior notes are unsecured and rank equally with the company's other unsecured senior indebtedness. See the IPO prospectus for extensive additional information on the FELINE PRIDES and their mandatory conversion provisions by clicking on the �Link to IPO Prospectus� provided below.""

      You will be forced into common at presently a very unfavorable rate. These mandatory convertibles have all the downside and not enough upside. IMHO avoid them at all costs.

      • 1 Reply to flipper_58
      • I have been buying Amerco pref A for income. It is the holding company for Uhaul. It presently just exited bankruptcy with a full recovery to all and has a $20 book value (UHAL). It will have a decent year in earnings too.

        The kicker is AO_PA has $2.65 worth of back dividends in it. The Board has declared it will be a full recovery for this preferred too which means the back dividend will be paid. At it's present $26 you will get $2.12 (regular dividend rate) AND $2.65 for a total of $4.77 in the next 12 months. This paper should yield 8.5% once up in running or $25 par based on comparisions. Assuming that, your 12 month return will be 15% ($4.77/$26-$1=15.08%). These also will be qualified dividend is my understanding.

        Of course do your own DD.


    • ostergrouch, have you considered asking your question(s) to someone identifiable who's with the company and would have knowledge of the situation rather than someone unidentifiable on a message board who could be both ignorant and a certifiable prankster, nut case, etc.?

      TXU's Profile page tells you the contacts, to wit:

      Phone: (214) 812-4600
      Fax: (214) 812-7077

      His bio tells that, apart from being a Sr. VP, CAO, & Controller, David H. Anderson had spent 7 of his 15 or 16 years (joined the company in 1988) in investor relations.

      Don't you think that you'd get better, more reliable info from him than an unknown "quantity" here?

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