Moody's affirms GEO

Moody's Investors Service said it affirmed The GEO Group Inc.'s Ba3 corporate family and senior secured debt ratings and B1 senior unsecured debt rating. The outlook is stable.

GEO Group is planning to acquire CentraCore Properties Trust in a debt-financed transaction. CentraCore, a REIT, is GEO Group's main landlord.

The acquisition of CentraCore will strengthen GEO Group's strategic flexibility and asset base and will eliminate various cost and structural uncertainties that have burdened GEO Group since its spin-off from the Wackenhut Corp. in 2003, the agency said. This transaction also marks another step in GEO Group's growing scale, franchise and revenues.

Moody' said these positives are buffered by the increased debt leverage, particularly secured debt, funding the merger. The acquisition will eliminate various debt-like lease payments by GEO Group - in effect, GEO is switching to being an owner from being a renter of several correctional facilities - but it is unclear whether GEO Group's operating margins will improve meaningfully.

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