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Corrections Corporation of America Message Board

  • yieldseeker yieldseeker Apr 7, 2000 1:30 PM Flag

    Blackstone's $22.7mm in fees not so bad

    because it gives Blackstone an incentive to
    accept PL's deal. If they match PL, then they lose those
    fees (or at least the $7.5 termination fee - - I am
    sure, maybe they still get the $15.2 commitment
    fee).

    IMO PL is much more trustworthy than Blackstone. I
    hated the BS deal because they set it up so that their
    interests were not consistent with our common shareholder
    interests, in that they could sit back and rake in 18%
    dividends on their preferred while the common dies of
    uncertainty.

    PL, by contrast, takes an up front fee of warrants,
    which are just options on the common. PL asks for no
    special preferred EXCEPT in the case that we common
    shareholders wimp out and do not exercise (essentially) all
    our rights.

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    • The existing pref. A trades for $11 and has a $2 dividend. PZN PA

    • for your responee to my uestion (12015) last
      week; I'm back at the computer now.

      Question:
      You mentioned the prefered A shares. What is the
      prefered going for or has that not yet been put out for
      purchase?
      Thanks.

    • You are correct.

    • I think he was referring to new Legg Mason's
      upgrade report.
      www.cnetinvestor.com did mention the
      upgrade last Friday.
      However, you may need special
      account to access the report content.

      Best
      regards.

    • What makes you think Doc did such a good job of
      running the company? The truth of the matter is that the
      man in charge when the stock reached its historical
      high was David Myers. At that time Doc was leaving
      operations to the professionals. At some point he tired of
      Myers and took away his control over all aspects of the
      company except operations--then later removed Myers from
      the presidency all together. The result was constant
      empire building,in-fighting and bickering between
      operations and the other divisions that continues to this
      day, all because Doc can't manage people. The most
      encouraging development in this fiasco is that responsibility
      for operations have now been returned to a true
      professional--Mike Quinlan. Hopefully the new CEO will let Quinlan
      run the whole company and force the other divisions
      to clean up their acts. A sign to look for is a
      turnover of vice-presidents shortly after the new CEO is
      in place.

    • ""I'm sure Fortress/Blackstone looked at cash
      flow pretty carefully late last fall. And those
      vultures thought a 6.50 conversion price was a good deal.
      ""

      Good point, if there was any left after they milked it
      first.

    • Sorry, I still haven't taken the time to fully
      understand the 10-K numbers, but I hope to do it, perhaps
      next week.

      My gut feel still echoes Chris
      Haley's analysis that on a combined basis, operating cash
      flow is strong (though not as strong as if they were
      at historical operating levels). It's the capital
      spending commitments and the structure that are causing
      the emergency.
      Not to mention the fees that being
      paid to lawyers, investment bankers, accountants and
      lenders. They now exceed, I believe, $100MM just in the
      past year.

      I'm sure Fortress/Blackstone looked
      at cash flow pretty carefully late last fall. And
      those vultures thought a 6.50 conversion price was a
      good deal. I think the operating numbers are coming in
      below what was expected then, but still...

    • Two important points, thx.

      What your assessment of cash flow looking from this summer on out?

    • I said a while ago that the bankers were in the
      driver's seat. At this point I suspect they (PZN lenders)
      will happily go along with the PL deal. I can't think
      of a reason they wouldn't. The wild card is the OPCO
      lenders - their cooperation is as important as that of
      the OPCO shareholders (probably more so).

      The
      merger makes all the goofy structure and accounting
      (including the going concern opinions)go away, which should
      be worth a few points in stock value
      alone.

      But now come the lawyers. The PL deal, even if
      approved by shareholders, will only be effective if all
      the securities litigation is resolved (to PL's
      satisfaction), or if PZN obtains sufficient insurance to cover
      future litigation losses. Thus, IMHO, the lawyers now
      control our destiny - not just our lawyers, but PL's, the
      plaintiff's and the risk underwriters'. It will be
      interesting to see how quickly they reach consensus.

    • I can't tell whether the dividend in preferred
      stock will be issued before or after the rights
      offering - could be either, and it makes some difference
      if you don't exercise rights.

      At current
      price, for each 1000 common shares you have, you can buy
      another 773 common shares at $2.19/share ($1,695 cash in
      on existing value of $3,375). If you don't exercise
      rights, you get diluted a total of 49%, not counting
      timing of preferred issuance (see below) and future
      preferred conversions.

      If preferred is issued before
      rights, you would get $1.27 per share (as opposed to
      $2.20 that was announced earlier); if issued after
      rights, then you would get $0.71 of preferred per share.


      The previously announced $2.20 per share was based on
      about $250MM of 1999 taxable income (E&P)that had to be
      distributed. That number is now $150MM. This indicates that
      they are taking a bunch of tax write-offs at PZN in
      1999 that weren't considered earlier.

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