Because public safety is involved, the operating
business has no hope of winning contracts unless it is in
sound financial condition. Bankruptcy is not a viable
option. A large equity investment is necessary. The only
concerns should be whether the terms are fair and provide
a basis for the company to restructure its
operations and return to profitability.
shareholder vote provides some leverage. It's very difficult
to collect votes from retail shareholders. If a few
institutions threaten to abstain or vote against the current
deal then it will be unlikely to receive the necessary
majority (although rejection of this deal without another
deal lined up would leave the company and the stock in
worse shape than now). I would like to see
Blackstone is currently paying $350 million and then
offering existing shareholders $35 million of their paper.
I would like to see existing shareholders given the
right to buy up to $100 million of the Blackstone
paper. This would:
1) significantly reduce the
dilution (as long as you subscribe)
2) require very
little modification of the existing deal and therefore
not impede the company from addressing its operating
3) more closely align the interests of existing
shareholders with Blackstone.
negotiated for a $250 million investment. Keep them at that
level and let existing shareholders make up the
Would somebody explain what they mean when they
suggest that PZN might go bankrupt? Obviously, you can
not go bankrupt by missing a dividend. The only risk
that I am aware of is that losing REIT status (which
has not occurred yet) would result in taxes due.
Therefore, if REIT status can be retained, bankruptcy would
not be a risk - - correct? Therefore, the only issue
is whether PZN can pay 1999 dividends in the form of
securities. That would allow retention of REIT status,
eliminate the need to pay taxes, and allow the company to
go forward without new acquisitions on a positive
cash flow basis.
addressed many times on this message board and
also by PZN itself. The distributions necessary to
qualify for REIT status can be paid in cash or in
securities, though the securities cannot be common stock of
the issuer itself. Thus, PZN could not maintain REIT
status merely by splitting the already-woefully
low-priced common stock. However, PZN could easily issue
preferred stock of any sort so as to satisfy the REIT
As to bankruptcy, there is
the little matter of the $1 billion plus of bank debt
that PZN owes. Servicing the debt, and even paying it
back, should be a piece of cake, UNLESS there's
something more worse going on from an operational
standpoint than the company has disclosed.
post...with new lows at 3.75....common does not
look like a bargain unless it get close to 2...pfd a
better investment.....spoke with a real smart
person..who knows the math....believes upside exist but
,except for those buying at these levels...that the stock
based on the blackstone numbers etc will never go past
10...and he was very firm on the long term being never
past 10....that the current deals locks in a high of
10.....which i guess today looks alot better than 4....thus
pfd interesting...but common more interesting at 2
The merger of OPCO and PZN is absolutely
necessary. Merging is NOT equivalent to bankruptcy. Not
merging IS equivalent to bankruptcy, as the separtate
companies can no longer stand alone. A merger DOES give PZN
shareholders something, namely all of OPCO, and relief from
the burden of this complicated structure. The terms
of the Blackstone deal, however, give a large
portion of the combined cash flow to Blackstone - that's
what people posting here are upset about. They aren't
anti-merger, they're anti-Blackstone (or
PZN can't give further relief to OPCO because of debt
with the caveat that I rode this thing down from
$20 to $5...
I see only two factors that would
attract new money to PZN. First, just pure speculation
that the common has been beaten down so low that it
has 'value'. Second (and the best reason) is to
participate in the Preferred.
The 'value' premise
doesn't work for me, as that's the reason I first bought
at $20. The Preferred reason doesn't hold much
appeal because I'd prefer capital gains to current
If I ever purchase PZN again, it will be the common
and it will be AFTER the ex-dates for getting the
Preferred. Basically I believe after the ex-date we'll have
a stub that might trade as low as $2 and that price
assumes no fundamental bad news comes out.
believe it will go bankrupt because doc loses his main
positive - liability protection and gets zero for his
stock and options. But I do believe that some
gamesmanship could push this thing down to $2 even BEFORE the
Preferred ex dates come.
"preferred better". But then sold the stock on
the basis if this capital infusion does NOT happen
this stock could be facing a BK OPCO and the preferred
is way down the credit ladder. I still think CPV,
for yield hunters, is the "safer" way to play the
private corrections rebound. Importantly, Chuck Jones is
attempting right now, to build a prison and lease DIRECTLY a
Gov't enities, signed deals first of course. Of course
this opens up lots of opportunites because direct
Gov't leases can be resold. The CPV problems are
limited capital and margins that are narrowing due to
short rates climbing. But this ability to monetize
leases was something I was told PZN was to do, this
frees up boat-loads of capital of course. This is why
I'm involved in their story now.
Check out CMM-B. CMM is expected to come out of
BK in April. The $2.88 div. pref. B, trading at
$14.50, has over $4 in dividends arrears expected to be
paid in full under the current BK plan(the preferreds
are "unimpaired" thus keeping them out of the BK
vote, better to pay them).
I wasn't sure which Preferred RAUGAR was
referring to. The existing or the one to come. I agree with
your concerns on the current Preferred. It is not
presently paying nearly enough yield to entice me. While
the possibility of BR may be low, anyone who says
it's nil is kidding themselves. I wonder what the
bonds are doing.
One other thing, I believe that
PZN common has a ceiling more in line with 6.5-7.5.
It seems to me that an investor would either see
this ceiling (because of the convertibility option) or
none at all. I don't know someone can arrive at $10.
Are the accumulated dividends payable to new
buyers, and do you think they will continue to pay on the
preferred?? The common stock looks interesting if they can
pay the dividends...
With interest rates
rising this will hurt new mortgages , it appears that
they are into existing low grade debt...
Yes, past dividends are due to any new buyer, the
"old" buyer by selling is giving up his rights to the
accured dividends in arrears.
I invite you to read
the CMM board past messages, "stockmavin",
diane_40_40" and a few others really have done a lot of work
here. I was introduced (at higher prices) from a BK
expert I know. They all generally claim there is
$4/share in assets which work make the preferred OK. The
fear has been the continued delay of the BK
proceedings as a few of the unsecured creditors are trying to
get more cash out of some recent asset sales. The
secured creditors have approved the BK plan.
CMM is a REIT, they buy and leverage, and resell
mortgages. They lump many mortgages together, secure them
and resell them. What CMM largely owns left are
called residuals, the A,B,C's trauches are sold off as
these are left. They are paying mortgages with good
cash flow, the question arises in the end depending on
the mortgage pool...residuals come last in the payoff
line. So it's a coin flip on what their worth. The GAAP
accounting of residuals lists them at 1/2 maturity (I
believe)so saying BV is $4 isn't totally off the wall.
CMM like many mortgage REIT's didn't have cash flow
problems, they had loans called due to collateral
concerned. If 90% of the mortgage pool pays off and you own
the last 10%, the residual....you will receive
nothing. That's why it's ALWAYS good to becareful when
buying mortgage mutual funds.....they goose them with
lots of residuals that have huge, 15-20% yields.