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Press release from Business Wire

The GEO Group Signs Agreement to Purchase 100% Interest in Municipal Corrections Finance, L.P. for $27 Million

<ul> <li class='bwlistitemmargb'> <b>Purchase Gives GEO Full Ownership Interest In 11 Correctional Properties, Representing 10,000 Beds, Currently Leased And Operated By GEO</b> </li> <li class='bwlistitemmargb'> <b>Transaction Will Save GEO $155 Million In Future Net Cash Payments And Will Be Accretive After 2012</b> </li> </ul>

Monday, May 07, 2012

The GEO Group Signs Agreement to Purchase 100% Interest in Municipal Corrections Finance, L.P. for $27 Million07:30 EDT Monday, May 07, 2012 BOCA RATON, Fla. (Business Wire) -- The GEO Group (NYSE: GEO) (“GEO”) announced today that it has signed a definitive agreement to purchase 100% of the partnership interests in Municipal Corrections Finance, L.P. (“MCF”) for approximately $27 million in cash plus the release of approximately $10 million in cash held in escrow for the benefit of MCF. MCF currently has $94 million in bond principal (the “MCF Bond”) outstanding, or $57 million in bond principal net of $36 million in restricted cash reserve funds. Closing of the transaction is subject to third party approvals, including consent of the MCF Bond trustee. The MCF Bond will not be recourse to nor be guaranteed by GEO. MCF is a consolidated variable interest entity, which GEO assumed in August 2010 as a result of GEO's acquisition of Cornell Companies, Inc. MCF was created in August 2001 as a special limited partnership to acquire eleven facilities which MCF leases back to GEO under a 20-year Master Lease Agreement ending in 2021, with options thereafter at GEO's sole discretion to renew the sub-lease of each separate property for up to 25 additional years (the “Lease”). As a result of the purchase of MCF, GEO will reduce future net cash payments associated with the Lease by $155 million over the remaining full term, inclusive of all renewal options and tax benefits. The net cash capital investment for GEO is $27 million, for which GEO will generate a return on capital at or above the rate typically generated by owned facilities. The transaction will also substantially increase GEO's cash flows over the life of the Lease, which will enhance GEO's ability to execute on its growth and shareholder value creation initiatives. Additionally, under the Lease, GEO is scheduled to have a five-year minimal rent period under the Lease starting approximately in 2016, resulting in estimated cash savings of $25 million per year based on the current annual cash rent payments to service the bonds. The transaction will have a neutral impact on earnings in the first year and will be accretive in future years. GEO expects to close the transaction during the second quarter of fiscal 2012. George C. Zoley, Chairman and CEO, said, “The strategic purchase of 100% of the partnership interests in MCF will significantly increase our cash flows by approximately $155 million over the life of the lease, substantially enhancing our ability to execute on our recently announced shareholder value creation initiatives and our continued growth strategy.” The GEO Group, Inc. is the world's leading diversified provider of correctional, detention, and residential treatment services to federal, state, and local government agencies around the globe. GEO's worldwide operations include 20,000 employees, 113 correctional, detention and residential treatment facilities, including projects under development, and 79,000 owned and/or managed beds. GEO offers a turnkey approach that includes design, construction, financing, and operations. GEO represents government clients in the United States, Australia, South Africa, and the United Kingdom. This press release contains forward-looking statements regarding future events and future performance of GEO that involve risks and uncertainties that could materially affect actual results, including statements regarding estimated earnings, revenues and costs and our ability to maintain growth and strengthen contract relationships. Factors that could cause actual results to vary from current expectations and forward-looking statements contained in this press release include, but are not limited to: (1) GEO's ability to complete the purchase of 100% of the partnership interest in MCF; (2) GEO's ability to successfully pursue further growth and continue to enhance shareholder value; (3) GEO's ability to access the capital markets in the future on satisfactory terms or at all;(4) risks associated with GEO's ability to control operating costs associated with contract start-ups; (5) GEO's ability to timely open facilities as planned, profitably manage such facilities and successfully integrate such facilities into GEO's operations without substantial costs; (6) GEO's ability to win management contracts for which it has submitted proposals and to retain existing management contracts; (7) GEO's ability to obtain future financing on acceptable terms; (8) GEO's ability to sustain company-wide occupancy rates at its facilities; and (9) other factors contained in GEO's Securities and Exchange Commission filings, including the forms 10-K, 10-Q and 8-K reports. The GEO GroupPablo E. Paez, 1-866-301-4436Vice President, Corporate Relations