The Brentwood private prison company CoreCivic may have found a new source of financing as U.S. banks are backing away from the industry.
On Wednesday, the analytics firm Moody’s rated a proposed loan to CoreCivic as somewhat speculative and subject to credit risk.
The Moody’s rating doesn’t identify which bank might be behind the proposed loan. The news outlet Debtwire reported CoreCivic is trying to strike a deal with the Japanese bank Nomura.
A representative from CoreCivic said they were unable to provide comment about the loan.
The loan may not have the highest rating, but CoreCivic has struggled to get loans from any banks in recent months.
JPMorgan, Wells Fargo, Bank of America and SunTrust all pledged to stop financing the private prison industry in 2019, although several of those banks have agreements to continue funding CoreCivic through 2023.
One pressing financial concern for the company following those announcements was the repayment of $325 million in senior notes due in April 2020.
In a conference call in November, CFO David Garfinkle said the company did have the ability to repay the notes with existing credit. However, he said the price of debt for CoreCivic had increased due to “recent headlines from some of the industry’s banking partners as well as Washing politics.”
Garfinkle said the company would continue to look for new means of refinancing those notes
In a news release last week, CoreCivic announced that it planned to pay off the remainder of those notes. The report from Moody’s confirms that the company plans to use the potential loan to do that.
According to Moody’s, the loan would be secured by some of CoreCivic’s real estate assets that have active management contracts with the U.S. government.
The Moody’s report adds that securing the loan with unencumbered assets is unusual for the company, which has historically looked for unsecured loans. Moody’s attributed the shift to the lack of market access for the private prison industry.