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Corrections Corporation of America Message Board

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  • flipper_58 flipper_58 Apr 18, 2000 4:12 PM Flag

    What your Special Div. might be.

    If you notice the chart on the pref. F the common
    fall sharply after their last conversion date on
    Feb.3,2000. Those that did not convert took a 25%
    haircut.

    Now certainly this situation could work out
    differently, but if I was CFO I won't want this PIK hanging
    around. Giving us only 12% pretty much forces our
    hand.

    JMHO

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • post 12281"""If you notice the chart on the pref.
      F the PREFERRED fall sharply after their last
      conversion date on Feb.3,2000. Those that did not convert
      took a 25% haircut.""

      post 12289 "Of course
      Pref. stock has no maturity so par value is NOT as
      important as with a bond.""

      sorry, probably more
      errors.....but it's cocktail hour...cheers.

    • I need more explanation of what you are saying.
      If the common fell after the conversion date, didn't
      the shareholders who converted lose money? After all,
      they converted based on a higher average price, right?
      They got $10 worth of common per share of Pref. F, but
      at the higher common price that prevailed before the
      last conversion. Furthermore, the common was probably
      paying less than 12%. Why wouldn't the holders of Pref.
      F be better off holding the Pref. F, collecting 12%
      cash, and waiting until the final buy-back at par. At
      that point they can take their 12% dividends plus the
      $10 par value and buy common. Unless the common has
      shot back up, they will own more shares than by
      converting earlier.

      • 2 Replies to yieldseeker
      • Suprisingly, the day the PIK dividend went
        ex-div. the price of the common did not change. I bought
        shares the day before ex-div., collected the div. and
        did not realize a drop in price of common due to the
        div. going ex-div. Interesting to note I thought.

      • ""If the common fell after the conversion date,
        didn't the shareholders who converted lose
        money?""

        Sorry if I gave the wrong impression... I meant the
        Preferred F dropped.
        First CMM is bankrupt and not
        paying anything at this point, but here's on eway to
        look at how they can force a force like their's to
        convert. You got 3 share for every 100 common you owned
        for a dividend of $30 per hundred. Since the common
        was about $1 that equaled 30 shares of common,
        roughly. Since AFTER Feb 3 you could not convert your $30
        worth of pref. stock you are left with a $10 par pref.
        paying 12% cash . Well at that time CMM's other cash
        paying pref. stock B was yielding apprx. 17%, see why
        you would want to convert? Complicated enough? Of
        course Pref. stock has no maturity so par value is an
        important as with a bond. The pref. stock will always trade
        relative to it's yield not it's par value as I understand
        it.

        So the key is the relative value of PZN's existing
        debt to decide if the conversion will happen. CMM's
        pref. was cash paying, PZN is a PIK so you get even
        more pref....hmmmm.

 
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