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Corrections Corporation of America Message Board

  • beancpa beancpa Apr 16, 2000 9:52 PM Flag

    PZN OBSERVATIONS 2

    very unlikely that the chaotic markets will
    affect this deal an inch. Bid remained firmly at 3 1/4
    as illiquidity took over friday.

    if bs takes
    the deal it's good news. If bs walks it's better. If
    nothing happens it's bad.

    pac life signed an
    agreement and will protect their common interest. Be
    prepared for the pik preferred dividend to be much lower
    than $2.40 due to the fourth quarter loss. This is
    good as there will be less dilutiuon.


    question? Will the common go ex-dividend before ex-rights
    ??? Or vice versa ?

    is there an opportunity
    writing calls now in current market due to the double ex
    preventing the stock from reachin 5 due to dilution
    ?

    ohaha boys looking at this one as it meets the key
    requirements.... Niche in market....understand
    business....significant cash flow.....growth potential..look at old
    cca.......an easy buy with little downside and board seats up
    for grabs. Another player in the fray would furthur
    confirm an undervalued stock.

    quite long and quite
    happy.

    spammers who have no real facts in their posts can blow
    away.

    • I, like you have not had an opportunity to spend
      an appreciable amount of time looking at the
      8-K.

      I did look at the 10-K pretty darn close and
      noticed an interesting note to the CCA financial
      statements.

      Apparently, Doc (CEO) guarantied 10% of the note payable to
      PZN. That's $13.7MM.

      If this deal closes and
      the two companies re-merge, then debt can't go bad
      and Doc has no exposure.

      If the deal goes bad,
      this theoretically could pretty much wipe out all the
      proceeds Doc has collected from selling his stock since
      the beginning of the year.

      You have to wonder
      if he's planning for the contingency and redirecting
      his assets in a way that PZN can't get to
      them.

      If not, then you would have to assume that he has
      plenty of incentive to help the PL deal get
      closed.

      FWIW

    • Likely the cause of some significant selling but will end when he sells all his stock. Glad to see him go at this point.

    • that's why they call it "common" stock

    • depends on satisfactory settlement of the
      shareholder litigation OR procurement of insurance. Do you
      want to insure these turkeys? IMO, the lawyers can't
      roll over and play dead for PZN because of the threat
      of malpractice suits against themselves.

      So
      did Doc get his suit of legal armor in the deal? Or
      will he have to take his chances in
      court?

      Finally, F/B gets 22.7 mil in fees out of the deal --
      walkaway money. Plus the wall street "houses" who
      "advised" on the deal. Talk about obscene profits. What
      does that do to PZN's financials? BTW, does Doc get
      any goodies out of the deal? I read the whole thing
      in a hurry and didn't see it, but things get buried
      in the fine print.

      I think somebody has been
      screwed -- again.

    • Why bother to value it at this point? I can see
      the relevance after it is issued and trading, in that
      you may want to buy or sell the Pref. C. But at this
      point, it is meaningless.

      If a common is going to
      pay a cash dividend, you can assume that the common
      will drop by the dividend amount on the first day it
      trades ex-dividend. But that does not directly impact
      the value of the common prior to ex-dividend. As a
      common shareholder, you currently own the cash that will
      be paid out. Therefore, the impact of the cash
      dividend on you depends upon whether you would rather the
      company held and reinvested this cash, or paid it to
      you.

      Since the Pref. C is PIK, the cash outlay issue is
      moot. In this case, it is more like a stock split.
      Stock splits have absolutely no intrinsic value impact
      on the pre-split common. They just arbitrarily
      change the number of shares and the corresponding price
      per share.

      The rights issuance is more
      interesting. It is equivalent to a stock split with a NEGATIVE
      dividend. You get more shares but own exactly the same
      percentage of the company, so that is no gain. But you must
      pay the company money (in order to avoid dilution),
      so it is a cost to the
      shareholder.

      Similarly, the Pref. C issuance can also be a negative
      dividend, if you hold PZN common in a taxable account. The
      Pref. C is effectively a device that forces common
      shareholders to pay the taxes that PZN owes, so it is a cost
      the common shareholders (unless your PZN is in an
      IRA).

      Don't get me wrong. I favor the Pref. C and rights
      issuances, because I favor the idea that common shareholders
      should provide the capital that PZN needs to survive.
      Otherwise we have to pay extortionate rates to a firm like
      Blackstone. Still, these issuances do NOT increase our
      percentage ownership of the firm, and they do cost us money
      (unless we are willing to reduce our percentage ownership
      of the firm).

      Also, the Pacific Life deal
      does involve some dilution, because in addition to the
      two issuances, PL gets the 20mm warrants.

    • I wasn't thrilled with fact that they were so
      vague on the date for shareholder approval
      vote--"special meeting later this year". Makes me think they are
      in no hurry, though a longer time frame may be
      necessary depending upon the selection process PL wants to
      use for the new management and whether they want
      those players ID'd before the vote. Would've liked
      something in the way of explanation, though. I also don't
      expect a lot of change until we see some positive news
      on occupancy.

    • It may be worthwhile for us to try to get a fix
      on the value of the special dividend in relation to
      each current share of common stock.

      Flipper's
      comments notwithstanding, it seems that the fourth quarter
      write-offs are not deductible for income tax purposes (e.g.,
      a decline in the value of a fixed asset results in
      a charge under GAAP but not a current tax
      deduction). Thus, PZN's taxable income for 1999 appears to be
      in the neighborhood of $150 million, and that will
      be the face amount of the special dividend.
      BUT...

      The special dividend will be a pay-in-kind security
      with a 12% coupon. PZN's existing preferred stock pays
      in cash and has a current yield of approximately
      18%. It therefore seems likely that the PIK preferred
      which will compose the special will trade at a sharp
      discount to face, perhaps as much as 40% or even 50%.
      Therefore, the market value of the special may be in the
      neighborhood of $80 million rather than $150
      million.

      Spread across the current outstanding shares of 118
      million, the value of the special thus appears to be
      approximately 70 cents per common share. But will the
      ex-dividend date for the special precede the issuance of $200
      million worth of common stock? If not, the special will
      be spread across approximately 200 million common
      shares, and will therefore have a value of perhaps 40
      cents per current common share.

      Comments
      welcome.

    • PZN trades now at 3 3/16. If you buy at that
      price and want to avoid dilution, you have to put up an
      additional $1.69 per share (to exercise rights which must
      raise $200mm on 118mm shares). The PIK Pref. C dividend
      counts as nothing but a potential tax liability. If you
      do not hold PZN in an IRA, then you must add the tax
      liability to the $4 7/8 per share cost.

    • not $2+. Because of the writes offs PZN did in the 4th quarter.

      Any call the PR department to get a sense when the spec. div. and the rights offering record date might be??

    • Insanity is ruling the day in the markets.

      PZN should easily have rallied to $5 on this
      news.

      Be patient or add to your holdings.

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