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Corrections Corporation of America Message Board

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  • yieldseeker yieldseeker Apr 18, 2000 4:31 PM Flag

    What your Special Div. might be.

    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.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • 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.

      • 1 Reply to flipper_58
      • If shareholders convert and sell their common to
        buy the higher-yielding preferred, that would depress
        the common. Isn't there a risk in the CMM example
        that you would convert at a $1 price per share of
        common, but so would everyone else. Then you and others
        would sell those common shares, depressing the price,
        so you would get less than $1 per share of common
        (and less than $30 per 100 original
        common).

        Also, my recollection of the proposed PZN Pref. C is
        that it has a mandatory redemption date, maybe 10
        years after issuance, requiring the company to buy it
        in at par, including accrued dividends. Is that not
        your understanding?

 
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