Corrections Corp Focuses On Leverage, Ratings
Corrections Corporation of America has secured a new $715 million credit facility with the goal of improving its credit rating and paying down its debt. The new loan is structured so the company can continue to pay down debt, try to draw its rating higher and become a better borrower later on, noted Irving Lingo, executive v.p. and cfo. "We have successfully been able to get our credit ratings increased," he said, noting an improved B1 rating from Moody's Investors Service and a B+ rating fromStandard & Poor's.
The new credit matures in 2006 and comprises a $75 million revolver, a $75 million "A" term loan and a $565 million "B" term loan, all priced at LIBOR plus 31/ 2%. Both the "A" term loan and the "B" term loan are prepayable. "We wanted to have a reasonable portion of our debt prepayable," Lingo said. In addition to the new credit, the company issued $250 million in senior notes with a coupon of 97/ 8% maturing in 2009. Altogether the new financing package retires a $750 million term loan priced at LIBOR plus 51/ 2% and $89 million of 12% senior notes set to mature in 2006.
The company had experienced some serious problems during the term of the loan and the agreement had to be reworked, Lingo admitted. A new management team was assembled in late 2000, and one of its goals was to refinance the debt. "This is the culmination of 15 to 18 months of our work," Lingo said.
The company also was very conscious of its debt maturity schedule. "We knew that the near term maturity of such a large amount of debt causes concern," said Lingo. "We thought it was important to extend the maturities and tranche the debt so that everything was not coming due on the same date." Lehman Brothers led the deal.