The GEO Group Commences Proposed Transactions to Address Its Debt Maturities and Strengthen Its Capital Structure
19 Julho 2022 - 8:54AM
Business Wire
The GEO Group, Inc. (NYSE: GEO) (“GEO” or the “Company”)
announced today a series of proposed transactions (the “Proposed
Transactions”) with certain of its secured and unsecured creditors
which will, if completed, comprehensively address the substantial
majority of GEO’s outstanding debt scheduled to mature in 2023,
2024 and 2026. The Proposed Transactions are conditioned upon
receipt of certain further creditor participation and consent. 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
over the next 30 to 90 days, subject to meeting the requisite
minimum participation and consent thresholds for the Proposed
Transactions.
Whereas currently, GEO would have to address approximately $2.0
billion in outstanding debt maturities between 2023 and 2024 and
approximately $580 million in outstanding debt maturities in 2026,
the Proposed Transactions would stagger the maturities of GEO’s
outstanding debt further into the future. Based on current
commitments and minimum participation requirements, as further
discussed below, GEO’s revised debt maturities are expected to be
approximately $170 million in 2023; approximately $430 million in
2024; approximately $340 million in 2026; approximately $900-960
million in 2027; and approximately $440 million in 2028. The
foregoing amounts do not reflect the significant debt reduction
which the Company intends to pursue as a result of the Proposed
Transactions, which require at least 80% of the Company’s excess
cash flow (as defined by the Proposed Transactions) to be allocated
towards 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 near-term debt maturities would have
posed to its ability to refinance its debt in the ordinary course
on satisfactory terms, pursue future quality growth opportunities
and enhance long-term shareholder value. Based on GEO’s historical
and expected cash flows and assuming reasonable future access to
the capital markets on satisfactory terms, GEO believes it will be
able to address these new staggered debt maturities in the ordinary
course of business.
George C. Zoley, Executive Chairman of GEO, said, “We are
pleased with the Proposed Transactions we have announced today to
help address the upcoming maturities of our outstanding debt in
2023, 2024 and 2026. These Proposed Transactions have been the
result of collaborative discussions with our various creditor
groups since November of 2021. We believe that addressing our
upcoming debt maturities through the successful completion of these
Proposed Transactions is in the best interests of all of our
stakeholders and offers the best path forward for the future of our
Company.”
We look forward to using the substantial majority of our free
cash flows to significantly de-leverage our balance sheet for the
foreseeable future. There have been concerns regarding our upcoming
debt maturities and our ability to access financing which have
placed significant pressure on our company’s stock price, our
Company’s access to the capital markets, and our Company’s credit
ratings. We are optimistic that the successful completion of these
comprehensive 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,” Mr. Zoley added.
GEO has already received, through a support agreement executed
on July 18, 2022 (the “Support Agreement”), written commitments to
support the completion of the Proposed Transactions from holders of
approximately 41% of the outstanding principal amount of GEO’s
Senior Notes due 2023; holders of approximately 65% of the
outstanding principal amount of GEO’s Senior Notes due 2024;
holders of approximately 68% of the outstanding principal amount of
GEO’s Senior Notes due 2026; and term lenders collectively holding
approximately 56% of the aggregate principal amount of the term
loans outstanding under GEO’s existing credit agreement dated March
23, 2017, as amended. Minimum required participation for the Senior
Notes due 2023, 2024 and 2026 is 50%, and minimum required
participation for the term loans outstanding with the term lenders
is 70%. The Company has received the required minimum participation
from the revolving credit facility lenders contemplated under the
Support Agreement.
Upon completion of the Proposed Transactions and based on
current commitments and minimum participation requirements, GEO
estimates its recourse interest expense would increase by
approximately $27 million to $30 million, pre-tax, in 2022, and
that total interest expense for the full-year 2022 would be $151
million to $154 million, pre-tax. For 2023, GEO estimates that
interest expense would increase an additional $37 to $41 million,
pre-tax. The Proposed Transactions are expected to close in 30 to
90 days, subject to review of the Registration Statement on Form
S-4 (the “Registration Statement”) by the U.S. Securities and
Exchange Commission (the “SEC”) and customary closing conditions.
GEO expects to provide updated full-year 2022 financial guidance
once the Proposed Transactions close and lender participation
levels have been finalized. The Proposed Transactions will have no
impact on GEO’s previously issued financial guidance ranges for the
second quarter of 2022.
For additional information on the mechanics of the Proposed
Transactions, please refer to the Registration Statement filed by
GEO with the SEC on July 19, 2022, including the preliminary
prospectus forming part thereto, relating to the exchange offers
and consent solicitations for certain of its outstanding 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 a part of the Registration Statement, and the information in
this news release is qualified by reference to such prospectus and
the Registration Statement. This news release is for informational
purposes only and does not constitute an offer to purchase or a
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any state or jurisdiction in which such
offer or solicitation or sale would be unlawful.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified
government service provider, specializing in design, financing,
development, and support services for secure facilities, processing
centers, and community reentry centers in the United States,
Australia, South Africa, and the United Kingdom. GEO’s diversified
services include enhanced in-custody rehabilitation and
post-release support through the award-winning GEO Continuum of
Care®, secure transportation, electronic monitoring,
community-based programs, and correctional health and mental health
care. GEO’s worldwide operations include the ownership and/or
delivery of support services for 103 facilities totaling
approximately 83,000 beds, including idle facilities and projects
under development, with a workforce of up to approximately 18,000
employees.
Use of forward-looking statements
This news release may contain “forward-looking statements”
within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and the U.S. Private Securities Litigation Reform
Act of 1995. Readers are cautioned not to place undue reliance on
these forward-looking statements and any such forward-looking
statements are qualified in their entirety by reference to the
following cautionary statements. All forward-looking statements
speak only as of the date of this news release and are based on
current expectations and involve a number of assumptions, risks and
uncertainties that could cause the actual results to differ
materially from such forward-looking statements, including our
ability to successfully consummate the Proposed Transactions on the
anticipated timeline or at all. Readers are strongly encouraged to
read the full cautionary statements contained in GEO’s filings with
the SEC, including the risk factors set forth in the Registration
Statement on Form S-4, including a prospectus and consent
solicitation statement forming a part thereof, which is subject to
change, the Company has filed with the SEC. GEO disclaims any
obligation to update or revise any forward-looking statements.
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Pablo E. Paez 1-866-301-4436 Executive Vice President,
Corporate Relations
Geo (NYSE:GEO)
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