S&P gives BB- to GEO notes

Standard & Poor’s said it assigned its BB- issue-level rating and 4 recovery rating to the GEO Group Inc.’s proposed $300 million senior unsecured notes due 2026. The 4 recovery rating indicates an expectation of 30%-50% recovery (in the lower half of the range) in the event of a default.

The notes will be guaranteed by all restricted subsidiaries that guarantee the senior credit.

Net proceeds from the offering are expected to refinance the $300 million 6 5/8% notes that mature in February 2021.

All of S&P’s existing ratings on GEO, including the BB- corporate credit rating, are unchanged. The outlook is stable.

“Our ratings on GEO reflect our view that the company benefits from high barriers to entry in the private corrections industry, including significant capital spending to build and maintain detention facilities, specialized knowledge and competence to win contracts and manage the facilities, and a good market position in a highly regulated industry,” S&P said in a news release.

“We believe GEO will maintain its current market share because of its higher operating efficiency compared with public facilities.

“Nevertheless, we believe the private corrections market will continue to represent only about 10% of the total corrections market, as there is little political or public support to grow the share of private prisons.”

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