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Corrections Corporation of America Message Board

  • ugadawg_98 ugadawg_98 Sep 21, 2000 6:20 PM Flag

    Bensabia

    Good to see you on this board again. That's
    what I call a true "positive indicator." Tell me what a real "bottom fisher" is doing with PZN. Preferred A, B, or the bonds?

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    • I did the very same thing the other day, but in a different channel on a different stock.

    • please excuse the misspellings in the preceding post. I tried to edit it, but it
      got posted instead!

    • He never used "S" in the quote.

      Here is
      the quote in full from page 6. of
      his
      letter:

      Prison Realty has proposed a comprehensive restructuring
      pursuant to which Prison Realty wll, pending stockholder
      approval, among othe tings, amend its chasrter to permit it
      toperate so as to be taded as a subchapter C corporation
      rather than as a REIT for federal income tax purposes,
      commencing with its 2000 taxable year.

      It would be a
      perfectly accurate post , if the
      word "subchapter" was
      omitted.

    • "-- a company on parole should be on its best
      behavior."

      I guess my point was that this has been a long
      downward spiral of failed vision, bad advice, bad
      business, etc. The guys who are running it now are probably
      somewhat out of their league with the company's current
      financial situation - I'm not sure anyone can do any
      better. Mistakes can pop up unexpectedly, but they are
      kind of predestined. Everyone just has to kind of get
      through it. And I'm not just talking about the top couple
      of guys. Many solid PZN/CCA employees who followed
      Doc when he walked on water must really be struggling
      with all that they were left with.

      I wouldn't
      be surprised about the DC Partners/ Fortress
      connection. But supposedly several investors were
      interviewed, and supposedly Blackstone was the best. I believe
      that was when Merrill Lynch was involved as an advisor
      on picking a deal.

      "...the full removal of
      said rot is essential to any hope of renewed trust in
      management"

      The "rot" includes an oppressive debt burden, empty
      facilities, no ability to raise capital, essentially a penny
      stock position in the market, and no friends on the
      Street. None of that is going away soon. But what is
      going on now has to happen before the rebuilding takes
      place. Hope they make it.

      The two remaining
      service companies are being folded in, on terms some find
      distasteful (me too - but it was part of the legacy). I
      believe Doc is out of them, too. I suspect his advisory
      role, if any, is minor.

    • Here are some elder questions, presented to you
      because you seem to have a long-term grasp.
      I do not,
      and I've wondered about this detail: Where did the
      Fortress/Blackstone deal come from? Was it solicited by CCA, and how
      were they (FB) able to secure such a lucrative exit
      deal?
      I ask because I don't know if that proposal, which
      evidently spurred the fleeting interest of Pacific Life,
      was related to the 'Fortress REIT', which was an
      apparent child of Mssrs. Devlin and Crants III, via an
      entity called "DC Partners". But there may be no
      relationship.

      There are so many components, interacting over time, so
      it becomes difficult to tell whether or not the
      offending limbs have actually been cut away. And I would
      say that in structural terms, the full removal of
      said rot is essential to any hope of renewed trust in
      management.

      Given the fact that the remerged company will depend on
      the two management companies who are still to some
      degree directed by Mr. elder Crants, the present anemic
      state of stock is not a mystery. Whatever their level
      of sophistication, investors and policymakers alike
      will probably tire of being made fools. Which makes
      the recent dividend ambiguities all the more
      troubling -- a company on parole should be on its best
      behavior.

    • As you pointed out yesterday the IRS could argue
      that the FMV of the preferred is less than $24.46.
      Being able to convert that to 24.46 worth of common
      gave PZN a good counter agrument. The $1 floor I think
      almost totally negates PZN's argument. I am afraid we
      will end up with a taxable dividend and PZN may not
      qualify for REIT status because it did not issued a large
      enough dividend. I guess the IRS would be in it's glory
      collecting tax on a 140m from PZN and collecting tax on a
      $100m from its shareholders. I hope they got accounting
      advice for the $1 floor as I am not convinced it was
      good advice.

    • Doc, Jr & Devlin led the whole company (and a
      bunch of institutional investors who are supposedly
      pretty smart)down a blind alley. Amazing what
      encouragement from attorneys, accountants and investment
      bankers is available when tens of millions of fees are
      being spread around. There was the group that said do a
      REIT. There was agroup that said merge with the REIT.
      There was a group that said undo the REIT with
      Blackstone. There was a group that said undo the REIT with
      PL. The only good advice was to undo the REIT, a
      practical necessity when they ran out of money.

      Now
      the bad guys are all gone. The new guys are just
      trying to survive and get through this mess. The current
      Pfd dividend/conversion is based on the theory (tax
      law notwhithstanding) that all the common
      shareholders convert their preferred into common and the
      preferred goes away. Desired result: no change in
      proportionate interests, no corporate level tax, no preferred
      dividends to pay in the future.

      What the markets
      (and the shareholders) do in the meantime is out of
      their control. Anybody who held this stock for awhile
      and still held it on 9/22 should convert and ride it
      out. But it won't be pretty in the meantime.

    • The Internal Revenue Code is made up of chapters,
      one of which is "Income Tax". That chapter is made up
      of subchapters, two of which are C and S. Subchapter
      C is corporate taxation. A "Subchapter C"
      corporation is the same as a "C" Corporation, and either
      designation is appropriate when distinguishing it (a taxable
      C corp) from a corporation whose tax status is
      changed by a different subchapter.

      Subchapter C
      also contains rules on dividends and earnings and
      profits. Like Need High Yield, I couldn't find
      justification there for treating the Pfd Stock distribution as
      a taxable dividend. Then again, if someone was
      paying me big bucks, maybe I'd look a little harder.
      Unlike NHY, I defer to the hired guns.

    • A SubChapter S is taxed like a partnership. I saw nothing about electing Sub S status.

    • "The confusion is
      arising because the letter
      from Ferguson dated
      September 5 used the
      terminology "taxable sub-chapter "c" corporation. There is no
      such animal. There are only taxable C
      corporations"

      THANK YOU bensabia for pointing this out.
      Does this
      mean that the new President of PZN made an error and
      meant something other than what he said??? Did he mean
      that S is the sub chapter corporation?

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