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
spammers who have no real facts in their posts can blow
I, like you have not had an opportunity to spend
an appreciable amount of time looking at the
I did look at the 10-K pretty darn close and
noticed an interesting note to the CCA financial
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
If not, then you would have to assume that he has
plenty of incentive to help the PL deal get
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.
did Doc get his suit of legal armor in the deal? Or
will he have to take his chances in
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
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
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
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
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
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.
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.
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
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.
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.