Secured Debt Capacity and Related Issues Under The GEO Group’s Debt Documents

Secured Debt Capacity and Related Issues Under The GEO Group’s Debt Documents
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In a new report Xtract Research examines debt capacity and related issues under the GEO Group’s debt documents.

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GEO Group’s Secured Debt Capacity And Related Issues

Highlights from the report include:

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The Credit Agreement is a throwback of sorts, as it includes old style maintenance financial covenants, for the benefit of all lenders, tested quarterly. In addition, its debt prepayment covenant actually restricts voluntary repayment of the senior notes, which is of course relevant to the extent any of the senior notes are targeted.

GEO did not enter into a “COVID Amendment” in 2020, unlike many borrowers who needed to waive or modify their financial covenants due to the impact of the pandemic and grant significant concessions in the form of tightened debt, lien and restricted payment provisions.

The Credit Agreement provides limited general purpose secured debt capacity. The incremental facility allows $450mm of first lien debt, with no requirement to meet an incurrence test.

Given its limited secured debt capacity, amendments may be in GEO’s future unless the agreement is refinanced. To complicate matters, recall that GEO’s lender universe is shrinking.

The bonds could be more permissive due to loopholes contained within the debt and liens covenants.

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