one significant reason why I haven't sold all of my PZN. I have kept comparing PZN/CCA to VTR/VC (Vencor), which I suspect you're familiar with. Vencor seems to have had far worse problems than PZN, but PZN has been punished in the market essentially to the same extent. Thus it would seem that PZN is undervalued. If you've followed Vencor, I'm curious what you think about the comparison.
Typically government contracts provide that if the vendor declares bankruptcy, the government can declare an event of default and terminate the contract. If so, a PZN/OPCO bankruptcy filing would place all contracts at risk of either outright termination or renegotiation at more favorable terms to the government. JMHO
But, the actual damage was caused by the investment co.'s pressing them to pay off the loans(although the property values exceeded the loans by far and there was no problems with cash flow). To protect the assetts from being decimated by having to sell off properties at the worst time the Bill's (two tough real estate guy's who run CMM)did a BK and FU in one fell swoop. The small common shareholder went down the tubes, but so did the 2 Bill's...except that they are not crooks (although not liked either)but they have the opportunity to get the CMM ship back on course(it's profitable)and will come out of BK in about May maybe at a $4 price....currently $1.06....If we had the 2 Bill's at the helm of PZN I'd sleep better at night.Anyway ,if interested look at CMM board..some of the guy's posting here got caught as well. A better deal will come..DUMP THE BLACKSTONE DEAL!
I worked for Bruce Lunsford for a short time in 1980 when he was Secretary of the KY Economic Development Cabinet. Like Doc, he is very bright (Attorney and CPA), ambitious and has huge, brass, balls. He got caught in a double whammy. He bought the nations' largest nursing home company- which was much bigger than Vencor, and was losing money. He got caught in a real squeeze when Medicare cut down on fees they would pay nursing homes. To escape that tradegy, he created Ventas, which was a real estate holding company that he planned to transfer the real estate into and get the Vencor nursing homes to pay Ventas a leasehold fee. The whole house of cards fell when Vencor couldn't pay Ventas, or their other creditors. Lunsford and his bes pal sold a good hunk of their stock right before the excrement hit the fan. I see the PZN/CCA situation a little different. Personality wise Lunsford and Crants were close. Both over-reached. Doc needed money for expansion and couldn't raise enough as a C Corp. He went the REIT route,which put him in deeper trouble, because he had to pay out all of his capital to we stockholders. Hindsight is 20/20, but why he (the analysts and we stockholders) didn't figure this out can only be explained by Doc's success in building CCA and investor confidence in his ability. The CA spec prisons were Doc's Achilles heel. He had to keep throwing off cash to a non-productive venture. Both companies probably are guilty of not being up-front with their stockholders. Both had "crony" boards that they controlled. I think CCA/PZN will go bankrupt, but that the new owners, who will buy the assets at a very deep discount, will make plenty of money. I probably will reinvest after the company is reorganized.
As a wannabe happy brigader, I am saddened to see your bankruptcy prediction. IMHO the remerger will pull PZN/CCA out of its death spiral. This is based on the value of the core business, improving occupancy from the USBOP, INS, USMS, and Wisconsin contracts, and the freeze on new spec projects. That said, there are probably two more surprizes, (again IMHO) that may force the stock price down even more--both of which should be disclosed in the remerger prospectus documents.
First, 1999 occupancy levels will likely appear flat (and less than 90%). Primarily because the new contracts just about equal the new beds coming on line.
Second, the combined companies are just about out of cash (as suggested before by either Brendy or Buselli). This is because of the foolish strategy of trying to grow while paying out an amount in excess of earnings combined with below breakeven operational results.
The best news is that Junior and Devlin are gone--with these two "geniuses" no longer getting paid to screw things up, the operational people should have the resources and time needed to return this company to its leading position in the industry.
So, once again, RAUGAR is right--the price is going to hit $4 and may even go to $3 before recovery. But it will recover. Unfortunately, the Blackstone deal (or some other infusion of cash) is absolutely necessary to ensure survival. (Once again, IMHO.) Keep the faith!
Checking the price of their debt issue is a good way to see if BK is in the cards. I've seen stocks trading at $2-$4 when the bonds are 20 cents on the dollar(Iridium). Last I checked PZN's debt was not trading THAT badly. I'll try to check again, or if anyone else knows.
I'm curious on this recent 13-G filing if this is truly a new filing or an add on. If it is that means Dreman and "related" groups are up climbing up to 20% of this company. Certainly they would want to get control of things to stop the Fortress deal soon if that is their plan. No problem finding sellers it appears.