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Corrections Corporation of America Message Board

  • oystergrouch oystergrouch Apr 18, 2004 7:48 PM Flag

    OT Flip TXU

    TXU_Pd is selling for $37.15 and yielding 10.96%.

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    • oystergroup, are you aware TXU pref D has a manatory convertible contract on it? In 2 years this preferred will be converted into roughly 1 share of common, so you must be very confident the common will be $50 by 5/2006. So you bascially own common at this point as much of the future dividend is build in. Just in case you had not seen a description of the terms:

      ""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.""

      • 1 Reply to flipper_58
      • Maybe TXU_Pd is not a good investment now. I would have to do some complicated math. The thing about this preferred is its big discount (to the $50). I bought at $37.16, not too far from where it is now. At that time there were 9 dividend payments due before call. That, at $4.06, comes to $36.54. So, that is close to the cost of the investment. At the time I did the math to find my breakeven price for the common and it told me that the common would have to reach $33 for me to breakeven, not counting dividends. At the time I bought, 1/23/04, the common was $25.39. That means it has about two years to go up $8. Since the company is righting it self and is in an area (Dallas) that is growing, my hope is that it will reach my price. I also hope my math was right. It's my weak point, so anything is possible. I'm not sure of the 06 date of the call, but there are at least 8 dividend payment between now and then. That would total $$32.48.....not a bad cushion.

 
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