Lehman Brothers' $495 million six-year "B" loan for Corrections Corporation of America has already been twice oversubscribed, with commitment offers still coming in at press time. Strong reverse inquiry from incumbent investors helped the deal get off to a rapid start, said one banker. The total refinancing package is $845 million, comprising $695 million in bank debt and $150 million in senior notes. Deutsche Bank, UBS Warburg and Société Générale are co-agents on the loan, which carries a B+/B1 rating.
Pricing on the credit is LIBOR plus 4% for the "B" loan. Pricing had not been flexed by press time and it could not be ascertained if this was an option. The four-year pro rata deck is priced at LIBOR plus 31/ 2%, split between a $75 million revolver and a $125 million "A" term loan. Pricing on the existing term loan that is being taken out by the redux was LIBOR plus 51/ 2%, a banker noted.
If the refinancing is successful, Moody's Investors Service will notch up the credit ratings, as the company has significantly improved its financial profile. According to the Moody's report, there are still concerns, such as the inherent volatility of operating in a specialty sub-sector where demand for space is derived from local, state and federal contracts, and the correction facilities offer no realistic alternative uses. Other concerns include its reliance on secured debt, which is the company's primary source of funding. Calls to CCA were referred to bankers at Lehman who declined comment.