Comments on: Penn National Gaming – Workout or Worthless?

By: Diogenes IV

Diogenes IV — Tue, 22 Jul 2008 08:21:44 +0000

Would prior knowledge of a non-sale constitute “insider” trading if a director sells stock for 1/2 the promised sale price a few months before consumation thereof?

By: Diogenes IV

Diogenes IV — Tue, 22 Jul 2008 08:07:41 +0000

If PENN Directors cashed in holdings supposed to be worth $67 each for less than half that amount BEFORE the deal was due to be consumated, as Hamlet said, “Methinks there’s something rotten in PENNSMARK.”

By: Anand J

Anand J — Sat, 08 Mar 2008 02:44:21 +0000

Dan,

It would be very interesting to see what PENN’s intrinsic value is now that it is trading at its 52 week low and the market is pretty much assuming the deal will be wiped clean off the slate.

By: Dan

Dan — Thu, 06 Mar 2008 05:26:12 +0000

Now that PENN is near it’s 52 week low, I’m wondering if it would be a good investment *regardless* of the workout opportunity. The reason I ask – it appears this stock is getting punished based on the merger, and not based on an adverse change to the business itself. If the downside risk of a failed workout is already built into the current price, why not get in now and treat this as a normal investment? If FIG walks I suspect the stock will get punished further, probably unfairly.

Of course we would need to calculate PENN’s intrinsic value and apply a MOS discount on it to really know all of this. I’ll try to do that this week…anyone else care to try so we can compare notes?

By: Joe Ponzio

Joe Ponzio — Sat, 01 Mar 2008 05:48:20 +0000

Look at mortgage rates right now – on the rise with all other rates dropping. Banks need to clean up their balance sheets, so they will only lend money to A-level homeowners/buyers, and do so at higher rates than they can.

Part of that “clean-up” will come from backing out of these LBO deals which is why you need to make sure that financing and other terms are locked up tight, and that there is a back-up plan. You need done deals, or a big enough premium (on an annualized basis) that the risk of the applecart turning is outweighed by the potential profits.

To evaluate that, you need to estimate the odds of the deal falling apart, the odds that you’ll find many deals like this in the future, and the premium. Then, ask yourself: If I saw this situation 1,000 times, would I be a long-term winner or a long-term loser, regardless of the outcome of this particular opportunity?

Not sure? Then get the hell out of there.

By: Dan

Dan — Fri, 22 Feb 2008 02:49:58 +0000

Another thing I don’t understand is – why would the banks walk and risk getting sued? They are in the business to lend money, right? Sure, they aren’t making money at the moment, but it seems risky to alienate the business community by screwing these LBOs. Don’t they have reputations to protect?

By: Stephan

Stephan — Thu, 21 Feb 2008 01:07:12 +0000

Answer to the previous post:

In the filing

[ link ]

it says ” Following the limited waiver of the Standstill in December 2007, the Board of Directors of the Company approved in January 2008 a general waiver to the Standstill that would permit the Sponsors or their respective affiliates to purchase the Company%u2019s securities. Notably, this waiver does not require the Sponsors to purchase any Company securities or to purchase such securities by any particular time. In addition, the Company expressly reserved the right to revoke this waiver for any reason at any time. Therefore, no assurance can be given as to whether, in what amount, or at what prices, the Sponsors may purchase any of the Company’s securities.”

By: Dan

Dan — Wed, 20 Feb 2008 15:31:18 +0000

Stephan – thanks for the info. So it seems FIG has the go-ahead to purchase shares, however it doesn’t mean they have the cash to actually do it. If they did, why wouldn’t they simple lower their cost basis by purchasing heavily discounted PENN shares on the open market?

By: Dan

Dan — Wed, 20 Feb 2008 06:56:13 +0000

“there is a filing out that seems to allow the buyers to purchase PENN on the open market, thereby decreasing their total cost.”

Can you provide a link to this? I’d love to read it.

By: T

Tue, 19 Feb 2008 12:14:01 +0000

I am not too concerned about the regulatory approvals. It took harrahs about a year to get them all, it is just a matter of time.

there is a filing out that seems to allow the buyers to purchase PENN on the open market, thereby decreasing their total cost. what do you make of that and the fact that PENN has remained weak in light of their ability to buy it.

from the latest cc the buyers seem very committed to this deal. I like this arb in the mid 40’s.