the impairment of the assets and the deferred taxes are one time events that with good management will not be repeated. Not so sure about the write off of the tenant incentive fees. If I remember correctly these were cost generated by CCA to get cash from PZN to offset the cost of development of new facilites. They still have future development cost that will be factored in through higher depreciation if capitalized. Also maybe I just missed it but I saw nothing on occupancy rates. If the news was good I would think they would want to talk about it. Based on the past practices of management they want to hide bad news until they can no longer do so
I share your puzzlement. Why would PZN merge with CCA/OPCO? Why should PZN protect the equity of CCA/OPCO investors??? The way bankruptcy works is that the courts will require the BK entity to honor all its leases where those leases produce a positive cash flow. Therefore, PZN would see its leases defaulted on its low occupancy prisons. However, all leases on high occupancy prisons would be maintained. BK courts will not reduce the lease payments or alter any terms. It is all or nothing: honor the lease or terminate it.
So why would we want to merge with a bankrupted entity?
Does anybody know why CCA lost $150M in 1999 and/or an estimate of recurring losses.
My read is CCA is a sandwhich between PZN and the value (Fed and State payments for service). You cannot take out the sandwhich and get rid of the $150M per year loss. Therefore we need to take $150M (or the recurring loss) per year out of PZN's EBITDA to get a true sense of value here. If you do that, PZN is on death row.
On the other hand, Fortress and PL, must have seen these numbers and according to the same 10K, they are still interested.
I think they structured CCA to be too dependant on growth, hence the 84% occupancy. Capitalized construction costs of PZN must have been the projected income of CCA.