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Corrections Corporation of America Message Board

  • yieldseeker yieldseeker Mar 1, 2000 6:09 PM Flag

    PL warrants

    I would guess that the 20mm warrants PL would get
    in remumeration for providing the backstop are worth
    approximately $2 each (about $1 for the present value over 15
    years of the cost of buying common now, plus another $1
    for the insurance value of not putting up any money
    at all until you know it is
    worthwhile).

    Assuming $2, then PL is being paid $40mm to provide the
    $200mm backstop. But it is unlikley that the backstop
    will actually be used, since the rights are priced at
    a discount and can be sold in the market. Further,
    if PL does have to transact any of the $200mm, they
    will get a Preferred B that is inherently worth more
    than the common (because it pays 10% and can be
    converted at the discounted rights price).

    $40mm (or
    even half that) seems like a stiff fee to pay for this
    backstop, but perhaps it is the best we can hope to get.

 
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