Pre-Paid Legal Services announced that they have received $10 million dollars in financing from the Bank of Oklahoma. The $10 million will go towards the funding of additional treasury stock purchases.
The board of Pre-Paid has authorized the company to purchase 798,000 additional treasury shares. In the last 10 years, Pre-Paid has purchased 13.2million shares, totaling over $380 million dollars. On average, the shares have cost around $29 dollars a share. Over the last decade, Pre-Paid has been very aggressive about the purchase of their treasury stock, and through the purchase program has reduced outstanding shares by around 50% during the last ten years.
The loan from the Bank of Oklahoma is an unsecured loan which must be repaid in 12 equal monthly payments, with the first one beginning June 30, 2008. The $10 million was made available to the company immediately and adds another $10 mil to the existing debt which is approximately $65 million dollars.
Now I understand buy-back programs pretty well and it seems awfully unusual for a company to borrow money to buy its own stock back with such a small amount of money. It is a bit curious that PPL needs to borrow $10m (which they will be paying interest on) to buy back shares unless the company is gearing up to go private - why else the immediate need for such a small amount of capital. We will stay on top of this one.
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