Community Health Systems, Inc. (CYH)

[ulyssesgrant]

positr0n,

I just saw this point about why CYH doesn't simply buy back CVRs and book a "profit" and it's one I myself had considered. There are 4 reasons why that wouldn't be so simple:
(1) CYH is and has been really busy focusing on restructuring its debt and avoiding bankruptcy for the past few years, with senior lenders at its throat. Thus, even if they expect a payout, the cash savings from doing a buy back probably wouldn't be sufficient to allocate time and resources to that from more urgent survival efforts
(2) the actual outlay to CVR-holders probably wouldn't be a huge cash use since a good portion of the settlement and legal fees would, I think, be covered by insurance (they have excess insurance of up to $220M per occurrence according to latest K)
(3) CYHHZ has 500K average daily volume, so even if CYH wanted to buy back, say, 25% of the CVRs, they'd need 265 trading days (i.e. one calendar year) even if they were buying back 50% of average daily volume, which is basically almost impossible
(4) Finally, as soon as they disclose via 10Q that they've bought back some CVRs, the CVR price would skyrocket, and they would then only have had a maximum 60 trading days (i.e. one calendar quarter) to transact, or in other words, the maximum they could realistically buy back would be ~6% of CVRs at unaffected prices. Again, not worth the chase.