Private prisons in the United States are facing a variety of financing problems, but new allies appear to be emerging on Wall Street.
Private prison operators have raised suspicions about the long-term potential of their inmates and are rushing to make money after increasing political pressure to treat inmates.
Corsic Inc. Geo Group Inc. has said it will suspend its quarterly dividend to prioritize debt repayment and begin reviewing its corporate structure in a separate statement on Wednesday.
The two largest operators of private detention facilities in the United States are opposing President Joe Biden’s executive order in January that ordered the judiciary not to renew contracts with private prison operators. The big banks will no longer support the industry, and they have lost financial loss options as a result of credit rating downgrades.
Despite all these challenges, new allies have recently made their debut on Wall Street. Imperial Capital Group Inc. On Wednesday, Corsicov took the lead in leading the bond offer, the company’s first since 2013, and StoneX Group Inc. Helped Geo arrange for the sale of convertible bonds in February. The company is also the co-author of a new bond agreement with Korsivic.
“It’s not just about business disappearing overnight, it’s an operating environment,” said Joe Gomes, an analyst at Nobel Capital Markets. Agreement. “No organization is sure what the final game is.”
Representatives of Corsican and Imperial Capital did not respond to requests for comment. A spokesman for GEO declined to comment outside the agency’s statement on Wednesday, saying it was intended to monitor cash flows internally to pay off debt and increase funding.
The cost of accepting higher ing
As private prison operators also face higher costs, financiers are increasingly integrating environmental, social and administrative criteria into their investment choices. Corisiw’s new notes, which will mature in 20226 and will not be callable for three years, could yield about 8.5%, according to a person familiar with the matter, who did not ask to be identified as personal.
This is two percentage points higher than the average yield of low-rated junk bonds, which fell to an all-time low on Tuesday. According to data compiled by Bloomberg, the Corsican BB is in the bucket, with an average bond yield of about 2.2%.
The BSIN order, which applies to the U.S. Federal Bureau of Prisons and the U.S. Martial Services, affects contracts that accounted for about a quarter of GEO and Korsivic’s revenue last year, according to S&P.
Shares of Geo fell more than 19% on Wednesday, the lowest level since 2006, although the company’s decision to prioritize payments and lower leverage on shareholders’ payments has rallied somewhat to keep its bonds afloat.
The company said it is also reviewing its corporate structure as a real estate investment trust, which brings tax benefits but requires a minimum dividend distribution to equity holders each year. Korsivic canceled its RIT structure last year and cut off its dividends on down payment.
According to people who are knowledgeable about the subject, the pressure of the donors is the main motivation behind considering the Geo Switch. Bondholders are encouraging the company to raise money for optimal management of about $ 2.6 billion in long-term debt.
A group of such national donors is reviewing its options with law firm Akin Gump Strauss-Kahn & Field, according to the public, who asked not to be identified by quoting private discussions. A representative of Akin Gump declined to comment.