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Posted At : July 8, 2008 06:15 PM | Posted By : D McKee
Related Categories:
Penn National,Wall Street,Pennsylvania
In my pell-mell rush to read everything available about the aborted Penn National LBO, I somehow got it into my skull that Penn was getting $1.25 billion in equity from its would-be buyers, Fortress Investment Group and Centerbridge Partners.
How wrong I was! Sitting down with the official announcement, I soon saw the error of my ways: The agreement obligates Fortress et. al. to purchase $1.25 billion in preferred Penn stock. The sweet part is that Penn gets to keep the $700 million downpayment, even if the stock sale goes south. Nor does the stock carry voting privileges, although it can be swapped out for common stock in 2015 (or bought out by Penn).
As we now know, Penn wasted no time in exercising its newfound wealth. Even with a public commitment to a $200 million stock buyback, Penn still has plenty of cash with which to go asset-hunting (or to buy up other companies' discounted debt).
Speaking of mistakes, somebody at Business Wire was getting a little creative when they wrote that Penn's optioned land in Cecil County, Maryland, "borders Pennsylvania and Delaware along the Chesapeake Bay" -- a geographic impossibility.
Other interesting details in the announcement include a projection of 4% revenue growth in 2008 -- hardly unreasonable and maybe even conservative when new racino facilities in Pennsylvania and Maine are factored into the equation.
Also, when one looks at the roster of Penn's new and expanded facilities, it's obvious that this is a company that keeps costs firmly under control. A mere 1% overrun on Hollywood Casino at Penn National is awfully impressive ... Are you taking notes, Don Barden?
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