By DAVID A. FOX
Corrections Corporation of America (CXW [2]) has received preliminary court approval of a revised plan that would resolve all shareholder litigation against the Nashville-based prison operator.
The changes include scrapping an earlier plan to issue 17.2 million shares of common stock to shareholder litigants that included an agreement to assure shareholder litigants that the grant ultimately would have a value of $4.375 per share. This plan was potentially very dilutive of existing shareholders because the $4.375 per-share requirement could have been satisfied through the issuance of additional common shares.
The new approved agreement calls for the issuance of 46.9 million shares. Additionally, the earlier plan included a subordinated 6% note maturing in 2005. Instead, CCA will issue a $29 million, 8% note, with principal and all interest due in a lump sum in 2009. Further, if CCA common shares trade above $1.63 for 15 days prior to the note's maturity, the note is considered "fully satisfied."
As in the original agreement, the approved pact requires CCA to pay roughly $47.5 million in cash insurance proceeds to the plaintiffs.
CCA shares opened six cents lower Friday morning to $1.06. They traded as low as 19 cents a month ago.