Prison Developer Agrees to Restructuring Proposal
Prison Realty Trust Inc., a struggling developer and owner of prisons and other detention facilities, said Friday it has agreed to a $200-million restructuring plan with shareholder Pacific Life Insurance Co. of Newport Beach.
Under the agreement, Pacific Life, which owns about 4.5 million of Prison Realty’s 118.4 million outstanding shares, will receive warrants to buy either 10% of Prison Realty common stock or 20 million shares, whichever is greater.
Prison Realty, which is based in Nashville, posted a loss of $53.4 million for 1999.
Faced with mounting losses and shareholders lawsuits, the real estate investment trust in December announced a deal worth up to $359 million with another set of investors--Fortress Investment Group, the Blackstone Group and Bank of America.
Pacific Life then weighed in with a competing offer, which shareholders preferred because it allowed them to retain the same percentage of ownership as they now have, Prison Realty spokeswoman Peggy Lawrence said.
The other investors have five days to match the Pacific Life offer. If they don’t match the offer, the group will still get $22.7 million in fees.
Prison Realty has more than 73,000 prison beds under contract or in development in the United States, Puerto Rico, Australia and the United Kingdom.
The stock closed Friday at $3.38, up 94 cents a share on the New York Stock Exchange. The shares had lost 77% of their value over the last year amid investors’ concerns about management credibility, prison escapes and difficulty raising money because of a low stock price.
Under the Pacific Life plan, a 10-member board would oversee the company--four members from Prison Realty’s existing board, four designated by Pacific Life and two members jointly selected.
The company would merge its operations with Corrections Corporation of America, a sister company that manages Prison Realty facilities. Both companies share the same headquarters and certain senior officers.
