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Corrections Corporation of America Message Board

  • flipper_58 flipper_58 Nov 13, 1999 10:26 AM Flag

    Paying in junior securities

    Does paying in junior securities put them over
    the 50% debt covenent limit? I would think

    Another thing, now that the special dividend has been
    paid out PZN needs to just deal with a regular
    dividend payment. Regular dividends for C Corps. at least
    may be paid in stock. Not sure about REIT's. This
    would allow PZN to retain the $209mm and we would not
    be diluted to death from a third party. No more need
    for an SI. Anyone aware whether REIT can pay regular
    dividends in stock?

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    • the explanation.

    • I work on Wall Street and I heard this from
      someone at another Wall Street firm. I've heard that
      de-reiting is being seriously considered but of course that
      doesn't mean it will happen for sure. Take it for what
      its worth. As far as my source I'm sure you can
      understand why I can't be more specific than that.

    • "...just repeating what I've heard." Can you share where you hear these things. Need to know more about reliable ves lousie goosey rumor. Thanks for any info you care to share in this regard.

    • What are you missing? Well, one thing your
      scenario is missing is the immediate filing of numerous
      securities fraud class actions. And unlike the plethora of
      frivilous actions we always see whenever lawyers see a
      company's price decline and attempt to lay the fault at
      management's feet, I would say this scenario would leave PZN
      wide-open and vulnerable.

      Ample evidence exists in
      numerous press releases that PZN led investors to
      anticipate both REIT status and the special dividend being
      paid. Dividends were declared, and labled as one
      particular type of payment by PZN's board. To renege on
      these things in so cavalier a fashion would... well, we
      might as well own a tobacco stock.

      OTOH, I know
      of nothing that would prohibit PZN from paying the
      special and required dividends for 1999 as a REIT to
      investors (I NEVER like the idea of paying IRS instead of
      investors for the back taxes) and then converting to c-corp
      for the year 2000. And perhaps that would be what is
      required to satisfy the Banks and strategic investors
      going forward; the end of these required dividend

    • "a rose by any other name is still a

      Whether it's called a regular dividend or a special
      dividend or just a big mistake (oops), the point is we
      were paid $1.80 in dividends this year that they can't
      take back.

      Whether people like Dreman they have
      more or better information and just how much is
      debatable. Whether they get to express their views and
      opinions to those in management who make a difference is

    • Why pay the special if you're going back to a C

      Here's a naive question. Do investors like Dreman get
      more/better info. than us regular guys? If so, this seems
      like insider info. to me.

    • The rules for dividends for a regular dividend
      vs. the special dividend would be the

      Stock dividends and stock splits are "feel good"
      dividends. They do not change your ownership in the company.
      They are also not taxable. They don't work for REITs
      or for "C" corps., for that matter, to distribute
      the company assets to the shareholders.

      don't know of anything that would prevent a REIT from
      doing a rights offering. In fact, that would have been
      my other recommendation to PZN if they had asked or
      hired me. :-) In fact, had they done that months ago,
      with 118 Mill. shares, just raising $2.00 per share
      from the existing shareholders would have provided
      them with $100 Mill. to pay all dividends plus expand
      it it was only 50% subscribed!! Instead, we've all
      seen our shares drop by more than $2.00 per share
      since then and no solution in sight except to hire
      someone else for advice. I don't know why they pay so
      much for advice when workable solutions are so

    • I hate to even mention the words but....rights
      offering. It's really the only "fair" way to raise a lot
      equity. It allows each investor the opportunity NOT to be
      diluted. You MUST pony put your new share of dough or be
      dilutd to hell from what I've seen. In Canada all
      secondaries by law MUST be right offerigs so as to give all
      shareholders equal opportunity.

      I've been involved in a
      quite a number of rights offerings, usually with "stand
      by" investor willing to take the rest unsubscribed
      shares in order to raise the needed money. I would see
      pZN as such.

      The way it works. They issue
      right to each shareholder to buy shares at a, most
      likely set price, say $6/share. If you had 100 shares
      the rights might give to the right to buy 40 shares
      at $6. If you choose NOT to exercise your right to
      buy you will be diluted by a MINIMUM of 40%. See why
      it's a hammer? But it works.

      Don't know if
      REIT's can do rights offerings either...

      • 2 Replies to flipper_58
      • Rights offerings are nothing less than extortion,
        and what often gets hammered is the stock price, as
        investors dump the stock. After all this, will Doc make us
        bend over yet again? I say back to the c-corp if this
        is the best they can do.

      • According to the shelf filing in January of this

        All rights offerings must be open for 30

        It also cuts the price to the new valuation

        Institutions usually love rights offerings. Generally it's at
        the cost of those that do nothing, it relates to the
        over subscribtion option(low priced shares NOT taken
        by other shareholers) know
        all about that. So I can see a buyer like Dreman
        buying shares to get his record date holdings up(that's
        how they issue them). Once the rights offering is
        over you can rid yourself of "excess low priced stock"
        and the high cost stock too. Your left with a
        healthier company and extra low priced stock. The "extra"
        low priced stock you buy MORE than pays for the high
        cost stock you bought prior to the rights offering.

        In the rights offering I do we estimate the probably
        loss after record date and how much low price share
        I'll get on the over sub option. In most cases I only
        need 2 times my record date to off set my loss to be a
        record date holder(the price drops). My over sub factors
        usually are in the 5-15 times my record date holdings. In
        the issues I am aware of 35% of the record date
        holdings take appx. 90% of the over-sub. This info. I
        received from a transfer agent agent. See why insitutions
        love rights offerings?

        Sorry...rambling again.

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