The GEO Group Closes Senior Notes Offering and New Term Loan

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The GEO Group has closed a senior notes offering and a new term loan, raising approximately $1.67 billion in net proceeds. The offering included $1.275 billion in senior notes and a $450 million term loan. GEO plans to use the proceeds to refinance existing debt, including various loans and notes, and for general corporate purposes.

Financial Analyst

The GEO Group's decision to close a substantial senior notes offering alongside a new term loan is a significant reshuffle of the company's capital structure. The issuance of $1.275 billion in senior notes, with a higher interest rate for the unsecured notes at 10.25%, indicates GEO's necessity to attract investors at a costlier rate potentially due to perceived credit risk. This transaction also involves refinancing existing debt which will likely improve GEO's debt maturity profile and reduce near-term liquidity risks. However, the increased interest expenses due to the higher coupon rates could pressure the company's financials. Investors should monitor how these changes affect GEO's interest coverage ratio and overall debt servicing capability.

Debt Market Analyst

By opting for a combination of secured and unsecured notes, accompanied by a new term loan that carries an interest of SOFR plus 5.25%, GEO is diversifying its financing strategies. The refinancing at these higher rates, while potentially dilutive to shareholders – especially given the planned use of GEO common stock to retire a portion of the existing convertible notes – suggests an imperative to manage upcoming maturities. It's important to note that the Term Loan B and revolving credit facilities enhance GEO's financial flexibility. For potential debt investors, the different tranches and associated security provide a range of risk profiles, which could attract a broader investment base.

Market Research Analyst

The immediate market reaction to such financial restructuring will likely hinge on investor confidence in GEO's operational stability and future revenue streams to service the new debt. Additionally, the terms of the new debt, particularly the 10.25% rate on unsecured notes, may reflect market sentiment on the company's risk profile. A broader industry perspective shows that companies like GEO are facing increased scrutiny and regulatory challenges, which may inform investors' interpretations of the associated risks with this capital restructuring.

BOCA RATON, Fla.--(BUSINESS WIRE)-- The GEO Group (NYSE: GEO) (“GEO” or the “Company”) announced today that it has closed a private offering of $1.275 billion aggregate principal amount of senior notes, comprised of $650.0 million aggregate principal amount of 8.625% senior secured notes due 2029 (the “Secured Notes”) and $625.0 million aggregate principal amount of 10.25% senior unsecured notes due 2031 (the “Unsecured Notes” and, together with the Secured Notes, the “Notes”), exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Notes are guaranteed by GEO’s domestic subsidiaries that are guarantors under a new senior secured credit facility and outstanding senior notes. GEO also announced today that it has closed a new five-year $450.0 million Term Loan B (the “Term Loan”), bearing interest at SOFR plus 5.25%, under a new $760.0 million senior secured credit facility. The new senior secured credit facility also includes a five-year revolving line of credit for $310.0 million.

The offering of the Notes and the new Term Loan resulted in net proceeds of approximately $1.67 billion, after deducting the initial purchasers’ discount and estimated expenses payable by GEO. GEO intends to use the net proceeds of the offering of the Notes, borrowings under the new Term Loan, and cash on hand to refinance approximately $1.5 billion of existing indebtedness, including to fund the repurchase, redemption or other discharge of the Company’s existing Tranche 1 Term Loan and Tranche 2 Term Loan under its prior senior credit facility, the 9.50% senior second lien secured notes, the 10.50% senior second lien secured notes, and the 6.00% senior notes due 2026, to pay related premiums, transaction fees and expenses, and for general corporate purposes of the Company. GEO also intends to retire or settle a portion of the 6.50% exchangeable senior notes due 2026 issued by GEO Corrections Holdings, Inc., using shares of GEO common stock and cash. GEO expects to fund the cash portion of the retirement or settlement, which is expected to total up to $177.1 million, using a combination of the net proceeds from the offering of the Notes and cash on hand. Nothing in this press release should be construed as an offer to purchase, notice of redemption or a solicitation of an offer to purchase any of the existing term loans or notes.

The Notes were offered and sold in the United States only to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act, and outside the United States only to non-U.S. persons pursuant to Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and applicable state laws. This news release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

About The GEO Group

The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 100 facilities totaling approximately 81,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.

Use of forward-looking statements

This press release includes forward-looking statements regarding GEO's intended use of the net proceeds. These forward-looking statements may be affected by risks and uncertainties in GEO's business and market conditions. This information is qualified in its entirety by cautionary statements and risk factor disclosure contained in GEO's Securities and Exchange Commission filings, including GEO's report on Form 10-K for the year ended December 31, 2023, and GEO's reports on Form 10-Q and Form 8-K filed with the Commission. GEO wishes to caution readers that certain important factors may have affected and could in the future affect GEO's actual results and could cause GEO's actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of GEO, including the risks that the repurchase, redemption or other discharge of its Tranche 1 Term Loan and Tranche 2 Term Loan under its existing senior credit facility, the 9.50% senior second lien secured notes, the 10.50% senior second lien secured notes, and the 6.00% senior notes due 2026 cannot be successfully completed, and that the retirement or settlement of a portion of the 6.50% exchangeable senior notes due 2026 issued by GEO Corrections Holdings, Inc. cannot be successfully completed. GEO undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240418215262/en/

Pablo E. Paez (866) 301 4436

Executive Vice President, Corporate Relations

Source: The GEO Group, Inc.

FAQ

What is the purpose of The GEO Group's senior notes offering and new term loan?

The purpose is to refinance approximately $1.5 billion of existing indebtedness, including repurchasing, redeeming, or discharging existing term loans and notes, and for general corporate purposes.

How much did The GEO Group raise in net proceeds from the senior notes offering and new term loan?

Approximately $1.67 billion in net proceeds were raised.

What are the components of the senior notes offering by The GEO Group?

The senior notes offering included $650.0 million in 8.625% senior secured notes due 2029 and $625.0 million in 10.25% senior unsecured notes due 2031.

How does The GEO Group plan to fund the retirement or settlement of the 6.50% exchangeable senior notes due 2026?

GEO intends to use a combination of the net proceeds from the offering of the Notes and cash on hand to fund the cash portion of the retirement or settlement, expected to total up to $177.1 million.

Who were the Notes offered and sold to by The GEO Group?

The Notes were offered and sold in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States only to non-U.S. persons pursuant to Regulation S under the Securities Act.