September 2019
Private prison companies rely on financing organizations to bankroll their operations and expansion. Banks offer CoreCivic and GEO Group, the two largest private prison and immigrant detention companies in the United States, billions of dollars in revolving credit lines, term loans, and bonds that allow them to expand their reach into carceral and correctional industries.
In 2019, Wells Fargo, Bank of America, SunTrust, JPMorgan Chase, BNP Paribas, Fifth Third Bancorp, Barclays Bank, U.S. Bancorp, and PNC Bank all announced they would stop financing CoreCivic and GEO Group after their existing contractual obligations expire. See below for more details on the significance of these announcements.
Prison companies’ expansion depends on loans
In 2013, both CoreCivic and GEO Group, the world’s largest private prison companies, converted to register as Real Estate Investment Trusts (REITs) - companies that own or finances income-generating real estate. While this move exempts them from paying corporate income tax, REITs are required to pay out 90 percent of their taxable income as dividends to their shareholders every year. This means they cannot use the bulk of their profits to expand like other corporations, and their growth is contingent on outside financing.
Loans from banks and other financial institutions allow private prison companies to purchase smaller companies and increase the privatization of the industries of incarceration, detention, surveillance, facility services, and community corrections. Between 2005 and 2016, GEO Group acquired nine prison management or electronic monitoring companies, eight of which were obtained through debt financing totaling two billion dollars. In a similar manner, CoreCivic used debt financing to purchase two of the three residential reentry companies it bought between 2013 and 2016.
As a result of their expansion, both CoreCivic and GEO Group carry a large debt. As of March 2019, CoreCivic had $1.8 billion in debt and GEO Group had $2.8 billion. This debt comes in the form of revolving credit facilities, term loans, and bonds. Revolving credit facilities, better known as “revolvers,” are the most flexible of the three, as they offer corporations a credit line up to a certain amount, which they can draw down, repay, and redraw at any time up to the agreement’s end date. Companies often use revolvers as part of their regular operating budget. In contrast, term loans are for fixed amounts and have a specific agreed-upon schedule for repayment. Through corporate bonds, companies issue a series of notes in exchange for money, which financial institutions like banks both underwrite and hold as part of their own portfolios.
The role of banks
As of March 2019, CoreCivic has a revolving credit facility for $800 million, of which $214 million have been borrowed, and a term loan for $200 million, both due on April 2023. GEO Group has a revolving credit facility for $900 million, of which almost $530 million have been borrowed, and a Term Loan of $800 million due on March 2024. Both revolving credit lines and term loans were issued by a syndicate of banks, with some of the banks serving as administrative agents, which manage the line of credit and coordinate the other banks. Some of the banks also serve as “issuing lenders,” giving the companies letters of credit, which they can use as a guarantee.
In addition to these loans, banks are also involved in the issuing of bonds. As of March 2019, CoreCivic has four notes, which are medium-term bonds, totaling $1.1 billion, due to mature between 2020 and 2027. GEO Group similarly has four notes, totaling $1.1 billion, maturing between 2022 and 2026. These corporate bonds are underwritten by syndicates of banks that provide the full loan to the companies and then sell the notes to institutional investors such as investment firms, municipalities, endowments, and others.
Another way in which banks support the private prison industry is through underwriting the companies’ stock offerings, buying private prison stock for the bank’s investment and for its clients. The largest investors in the private prison industry were identified by Freedom to Thrive (formerly Enlace) in its “Million Shares Club” campaign.
Banks are also involved in the prison industry by providing banking and financial services to both private and state-run prisons.
Which Banks Are Involved?
An April 2019 datasheet published by In The Public Interest and The Center for Popular Democracy lists the following banks:
| Banks |
CoreCivic |
GEO Group |
||
|---|---|---|---|---|
| Credit and Loans | Bonds | Credit and Loans | Bonds | |
| Bank of America | X-Lead* | X | X | X |
| JPMorgan Chase | X | X | X | X |
| Wells Fargo | X | X | Trustee | |
| SunTrust | X | X | X | X |
| Barclays | X | X | X | |
| BNP Paribas | X-Lead* | X | ||
| US Bank | Trustee | |||
| Regions | X | X | ||
| Fifth Third | X | X | ||
| Citizens | X | X | ||
| PNC | X | X | ||
| Pinnacle Bank | X | |||
| First Tennessee | X | |||
| Synovus Bank | X | |||
*Lead indicates the bank serves as an administrative agent and coordinates matters related to the term loan and the line of credit.
The list above, of the main companies involved, includes a subset of this table, identifying the banks that hold most of the companies’ debt.
According to the companies’ April 2019 quarterly reports to the SEC, GEO Group’s line of credit and term loan are due to expire in March 2024, and the ones of CoreCivic will expire in April 2023.
Banks Divest from the Private Prison Industry
Companies and other institutions involved in the prison industry have been targeted by multiple campaigns calling them to divest from the industry. These calls have intensified during 2018-2019 after private prison companies were exposed as profiting from the incarceration and detention of immigrant youth. These campaigns have made meaningful gains.
In its 2018 Business Standards Report, Wells Fargo reported that as part of its environmental and social due diligence, its "credit exposure to private prison companies has significantly decreased and is expected to continue to decline."
In March 2019, JPMorgan Chase announced publicly that it "will no longer bank the private prison industry," explaining that the decision was a result of the bank's ongoing evaluation of the costs and benefits of serving different industries.
Shortly afterward, Wells Fargo CEO Timothy Sloan declared that his bank has decided two years ago to end its business relationships with both CoreCivic and Geo Group. A bank's spokesperson later confirmed that Wells Fargo had "cut ties" with CoreCivic and will do the same with regard to Geo Group when its current obligations expire.
In June 2019, Bank of America followed suit, announcing it would “exit its relationships” with private prison and immigrant detention companies. This was the last major U.S. bank on the list of banks financing the prison industry. Bank of America was also exposed as the main backer of Caliburn International, the private company that operates the country’s largest migrant youth detention center in Homestead, Florida.
In July and August 2019, SunTrust, BNP Paribas, Fifth Third Bancorp, Barclays Bank, U.S. Bancorp, and PNC Bank all announced they would also stop financing operators of private prisons and immigrant detention facilities.
All of these declarations refer to future loans, while the banks will continue honoring their existing financial obligations through credit and loan agreements until their maturity in 2023-2024. None of the banks addressed their ongoing investment in private prison companies’ stocks and bonds. These banks also have not addressed their past involvement in the prison industry through providing banking and financial services to prisons.