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Corrections Corporation of America Message Board

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  • newMK newMK Nov 10, 1999 8:54 PM Flag

    PZN : quarterly

    His no growth scenario, I believe, is similar to
    yours: "I think this non-growth, "mature" dividend would
    be north of 50 cents per quarter or $2.00 per year,
    not a bad cash yield."

    At that point, how
    would debt (prinicpal) be paid back? (I assume your
    cash flow available for dividends is after adding back
    depreciation). Even my bank gets tired of interest only payments
    after a while (especially lately).

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    • Anyone know how they feel about the new Merrill relationship?

      • 1 Reply to newMK
      • I called PZN today a asked for Doc. Jr. promply
        called back. Special dividend has already paid $1.80 per
        share this year. Balance must be paid by Dec 31, 1999.
        The remaining regular dividend can be paid by Jan.
        31, 2000. This gives PZN a 30 day repreve. If all
        dividends are not paid by Jan 31, 2000 a surcharge penalty
        of 4% of unpaid dividend is assessed. I believe this
        penalty is payable to IRS but I'm not sure.

        Also
        JR. said that PZN legal counsel advised that there be
        no question and answer session as Merrill Lynch is
        working very hard on this project.

        Finally,
        Merrill Lynch beat out Lehman for the work.

        In
        conclusion, I was happy to receive a call back. I do believe
        they will finally get their act together.

    • I hope I am not falling into a Doc trap. True,
      the no-growth, $2.00 dividend scenario does not
      incorporate return of principal, but as long as there are
      credit markets and PZN has sufficient fixed charge
      coverage, someone will be willing to lend the company money
      at some rate. Obviously, the cost of that money will
      depend on interest rates and credit spreads, but by my
      calculations the fixed charge coverage for PZN/OPCO at the
      mature stage would be over three times.

      Once the
      dividend issue is out of the way, this company should have
      a lot of appeal to potential lenders. It is
      acyclical or countercyclical, less levered than many
      REIT's, has tenants with close to zero credit risk, and
      is in a business with large potential for growth. In
      short, it is a very interesting diversifying holding in
      a loan portfolio. The risks involved (success of
      privatization generally, violent incidents, PZN gaining or
      losing share, etc.) are quite different and presumably
      lowly correlated with the risks most companies face
      (the economy).

 
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