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CXW: Recent Debt Issuance & Asset Sales Used For Deleveraging Measures

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By M. Marin



COVID-19 Impact Persists

CoreCivic’s (NYSE:CXW) 1Q21 results reflect the impact of lower occupancy rates as a result of the COVID-19 pandemic and recent asset divestitures. Revenue of $454.7 million was down 7.4% year-over-year, reflecting ongoing government measures to curb the spread of COVID-19 among prison and re-entry populations, as well as measure by ICE to contain the spread of COVID-19.

Several one-time items impacted 1Q21 results, including a $51.7 million charge to settle shareholder litigation and a $113.5 million tax charge related to the company’s transition from a REIT structure to a C-Corp. CXW reported a loss per share of ($1.03) but adjusted EPS came in at $0.24 compared to $0.30. Pro forma adjusted 1Q21 FFO per share was $0.47 compared with $0.50.

Accessing the Capital Markets To Restructure & Reduce Debt …

CXW used a portion of funds raised in recent asset sales (see below) to pare debt. Total debt declined to $1.72 billion from $$1.74 billion at year-end 2020. In addition, in 2Q21 CXW raised $450 million through the issuance of senior notes that mature in 2026 and redeemed all of its $250 million notes that were scheduled to mature in 2022. CXW also repaid $149 million of $350 million notes scheduled to mature in 2023 and pared its revolving credit facility by $80 million, using the combination of net proceeds from the issuance and cash from the balance sheet. CXW extended the weighted average debt maturity from 5.3 years to 6.0 years. While the debt maturity schedule below shows the schedule at the end of 1Q21, pro forma for the recent debt issuance and repayment of 2022 debt, we believe the picture is different, with no major maturities before 2023.

… And Streamlining Asset Portfolio To Further Reduce Debt

CXW closed on the sale of 42 of its non-core government leased properties for net proceeds of $27.8 million and used a portion of the proceeds for debt repayment. At the end of 1Q21, CXW had four non-core real estate assets held for sale with a net book value of $281 million. The company expects these asset sales to be completed in 2Q21 and anticipates generating net proceeds of about $120 million after repaying related non-recourse mortgage notes.

ESG Initiatives include Sustainability Measures

CXW issued its third annual ESG report on May 12, 2021. While the privately operated prison sector remains out of favor with many ESG investors, the company has implemented several measures that are aligned with ESG goals. For instance, CXW has increased the range and availability of educational and vocational training available to inmates who qualify.

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