GEO Group (GEO) launches proposed transactions to meet debt maturities and strengthen its capital structure

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The GEO Group, Inc. (NYSE: GEO) (“GEO” or the “Company”) today announced a series of proposed transactions (the “Proposed Transactions”) with certain of its secured and unsecured creditors which, if completed, processing the vast majority of GEO’s outstanding debt which is expected to mature in 2023, 2024 and 2026. The Proposed Transactions are conditional upon the receipt of certain other creditor participations and consents. As further described below, GEO has entered into a binding support agreement with a significant percentage of its existing secured and unsecured creditors for the completion of the proposed transactions. GEO intends to complete the Proposed Transactions within the next 30 to 90 days, subject to meeting the minimum participation and consent thresholds required for the Proposed Transactions.

While GEO is currently expected to process approximately $2.0 billion of outstanding debt maturities between 2023 and 2024 and approximately $580 million of outstanding debt maturities in 2026, the proposed transactions would stagger the maturities of the GEO’s outstanding debt further into the future. Based on current covenants and minimum equity requirements, as shown below, GEO’s revised debt maturities are expected to be approximately $170 million in 2023; about $430 million in 2024; approximately $340 million in 2026; around 900 to 960 million dollars in 2027; and approximately $440 million in 2028. The above amounts do not reflect the significant debt reduction that the Company intends to pursue as a result of the proposed Transactions, which require at least 80% of cash flow excess assets of the Company (as defined by the Proposed Transactions) to be applied to the repayment of debt. Upon closing of the proposed transactions, GEO will announce updates to its debt maturities based on final participation levels.

GEO believes that the Proposed Transactions will place the Company in a materially stronger financial position going forward by reducing the risks that its short-term debt maturities would have posed to its ability to refinance its debt in the normal course on satisfactory terms. , to pursue quality projects with growth opportunities and to increase long-term shareholder value. Based on GEO’s historical and expected cash flows and assuming reasonable future access to capital markets on satisfactory terms, GEO believes it will be able to meet these new staggered in-the-money debt maturities. normal business.

George C. Zoley, Executive Chairman of GEO, said, “We are pleased with the proposed transactions we announced today to help meet the upcoming maturities of our outstanding debt in 2023, 2024 and 2026. These transactions proposed transactions are the result of collaborative discussions with our various creditor groups since November 2021. We believe that the settlement of our upcoming maturities through the successful completion of these proposed transactions is in the best interests of all of our stakeholders and provides the best way forward for the future of our society. ”

We look forward to using the vast majority of our free cash flow to significantly reduce our balance sheet for the foreseeable future. There have been concerns about our impending debt maturities and our ability to access financing, which has put significant pressure on our company’s share price, our company’s access to capital markets and ratings. credit from our company. We are confident that the success of these global proposed transactions will have the potential to unlock equity value for our shareholders as we continue to execute our business strategy and aim to deliver consistently strong operational and financial results,” added Mr. Zoley.

GEO has already received, through a support agreement signed on July 18, 2022 (the “Support Agreement”), written commitments to support the completion of the proposed Transactions from the holders of approximately 41% of the outstanding principal amount of GEO Senior Notes due 2023; holders of approximately 65% ​​of the outstanding principal amount of GEO senior notes due 2024; holders of approximately 68% of the outstanding principal amount of GEO’s senior notes due 2026; and the term lenders collectively owning approximately 56% of the aggregate principal amount of term loans outstanding under GEO’s existing credit agreement dated March 23, 2017, as amended. The minimum equity required for senior notes due 2023, 2024 and 2026 is 50%, and the minimum equity required for outstanding term loans with term lenders is 70%. The Company has received the minimum required participation from the lenders under the revolving credit facilities contemplated under the support agreement.

Upon completion of the proposed transactions and based on current covenants and minimum participation requirements, GEO estimates that its recourse interest expense would increase by approximately $27 million to $30 million, pre-tax, in 2022, and that total interest expense for the whole of 2022 would be $151-154 million pre-tax. For 2023, GEO estimates that interest expense would increase by an additional $37 million to $41 million, pre-tax. The proposed transactions are expected to close within 30 to 90 days, subject to review of the registration statement on Form S-4 (the “Registration Statement”) by the United States Securities and Exchange Commission (the “SEC”) and customary closing conditions. GEO expects to provide updated financial guidance for the full year of 2022 once the proposed transactions close and lender participation levels are finalized. The proposed transactions will have no impact on GEO’s previously published financial guidance ranges for the second quarter of 2022.

For more information on the mechanics of the proposed transactions, please see the registration statement filed by GEO with the SEC on July 19, 2022, including the preliminary prospectus forming a part thereof, relating to the exchange offers and consent solicitations for certain of its outstanding assets. debt securities.

The exchange offers and consent solicitations described in the registration statement are made only by and pursuant to the terms and subject to the conditions set forth in the prospectus, which forms part of the registration statement, and the information contained in this press release are qualified by reference to this prospectus and the registration statement. This press release is for informational purposes only and does not constitute an offer to buy or a solicitation of an offer to buy securities, and there will be no sale of securities in any state or jurisdiction in which a such offer or solicitation or sale would be unlawful.

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