Moody's rates GEO debt Ba3, B1

Moody's Investors Service said it assigned a Ba3 rating to GEO Group Inc.'s proposed $1 billion senior secured credit facility consisting of a $700 million five-year credit facility and $300 million seven-year term loan and a B1 rating to the proposed $300 million senior debt issuance due 2023. The Ba3 corporate family rating and B1 senior rating were affirmed, and the outlook was revised to positive from stable.

The proposed financings will replace GEO's existing $1.1 billion of secured facilities.

The positive outlook reflects Moody's expectation that GEO will maintain, if not improve, its current credit metrics coupled with sufficient liquidity coverage. Despite higher levels of leverage and secured debt as a result of acquisitions, the company has maintained a good credit profile as reflected in improving operating margins and solid fixed charge coverage at 2 times, Moody's said, and its ratio of net debt to EBITDA is 4.8 times.

At the same time, the agency has concerns surrounding federal, state and local government budget pressures, which may lead to cancellation of existing contracts and demand for new contracts.

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