Current Report — Form 8-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 8-K Prison Realty Trust 9 42K
2: EX-2.1 Agreement and Plan of Merger Dated 12/26/99 95 394K
3: EX-10.1 Securities Purchase Agreement Dated 12/26/99 205 734K
4: EX-99.1 Company Press Release Dated December 27,1999 6 19K
EX-99.1 — Company Press Release Dated December 27,1999
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EXHIBIT 99.1
PRISON REALTY ANNOUNCES RESTRUCTURING LED
BY FORTRESS AND BLACKSTONE INVESTOR GROUP
$350 MILLION PREFERRED ISSUE TO COMPLEMENT NEW $1.2 BILLION
CREDIT FACILITY; COMPANY TO TERMINATE REIT STATUS,
CONVERT TO TAXABLE SUBCHAPTER C STRUCTURE; NEW MANAGEMENT TO BE INSTALLED AND
NEW BOARD TO BE CREATED
NASHVILLE, Tennessee, December 27, 1999 - The Board of Directors of
Prison Realty Trust, Inc. (NYSE-PZN), today announced a comprehensive strategic
restructuring program designed to reposition the company by strengthening its
financial position, simplifying its corporate structure and creating a new
management team and board of directors. As part of the program, which requires
shareholder approval, the company said an Investor Group led by an affiliate of
Fortress Investment Group LLC and affiliates of The Blackstone Group, together
with an affiliate of Bank of America, would purchase $315 million in securities
at closing and commit to purchase an additional $35 million in securities (for a
total of up to $350 million) in a newly configured company that would be created
through the merger of Prison Realty and the companies collectively operating
under the name Corrections Corporation of America.
Existing Prison Realty shareholders would be offered the opportunity,
through a rights offering, to "co-invest" up to $75 million with the Investor
Group and to receive preferred stock and warrants with terms identical to the
securities being purchased by the Investor Group (with the exception of certain
types of voting rights). The Investor Group has agreed to acquire those
securities and warrants not subscribed for by current shareholders to ensure the
$350 million total.
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The combined company, which would operate under the Corrections
Corporation of America name, is expected to be a taxable subchapter C
corporation, as Prison Realty would terminate its status as a REIT, in
connection with the restructuring.
As part of the combination with CCA, outside, or non-management,
shareholders of CCA will receive cash equal to their original investment.
Management and other employees of CCA will receive shares of the new public
company in exchange for their interest. The per share value to be received by
them is approximately 40% of the per share value received by the outside
shareholders, and their shares will be subject to certain vesting and lock up
provisions.
The transaction, upon completion, will have the effect of eliminating
liquidity concerns of CCA, Prison Realty's primary tenant.
"This is a highly focused, decisive action on behalf of this company,"
said Joseph V. Russell, Chairman of the Special Committee of the Board of
Directors, which was created in August 1999 to identify a strategic investor to
invest in Prison Realty and to review the company's financial alternatives and
organizational structure. "We are returning this company to the corporate
structure under which it achieved its greatest growth and success and through
which it became the leading company in the private prison industry."
"Importantly, we also believe the new credit facility and the
investment by Fortress and Blackstone, will ensure that the company has the
financial resources to prosper. Finally, as part of the restructuring, our new
investors and we have concluded that meaningful changes are necessary in the
composition of our management team and in the creation of a new Board of
Directors. These actions directly address the Company's desire to re-establish
credibility with shareholders and with the financial community."
Additionally, the company announced that, pending shareholder approval
of the transaction, no further dividends of any kind would be paid on its common
stock.
MANAGEMENT CHANGES
As part of the restructuring, the Special Committee announced that
Doctor R. Crants, Chairman and Chief Executive Officer of Prison Realty, would
resign as CEO upon closing of the transaction. In addition, he is stepping down
as Chairman, effective
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immediately. Following his resignation, Mr. Crants will be named to the
non-executive position of Vice-Chairman of the company and will serve as an
advisor to the Board.
Thomas W. Beasley, the former Chairman of the Board and one of three
founders, along with Mr. Crants, of the original company in 1983, will assume
the position of Interim Chairman immediately and interim Chief Executive Officer
following the closing of the transaction. J. Michael Quinlan will remain as
President and Chief Operating Officer of CCA and will also serve as Interim
President of Prison Realty, replacing D. Robert Crants, III, who also has
resigned effective immediately.
In addition, Mr. Beasley, along with Fortress and Blackstone, will
oversee a nationwide search for a new Chief Executive Officer and a new Chief
Financial Officer for the combined company.
FINANCING ARRANGED
Upon completion of the restructuring, the combined company will have a
$1.2 billion new term loan and revolving credit facility from a group led by
Credit Suisse First Boston and Lehman Brothers. The facility would replace
Prison Realty's existing $1 billion credit facility.
In addition, up to $350 million will be generated from the sale of a
new issue of 12% cumulative convertible preferred stock and warrants, primarily
to the Investor Group. The new issue would be convertible into the combined
company's common stock at a price of $6.50 per share and the warrants would be
exercisable at $7.50 per share.
Depending on the degree to which existing shareholders participate in
the rights offering, the Investor Group would own approximately 20% to 25% of
the combined company and warrants to purchase between 11% and 14% of the
combined company's common stock, on a fully diluted basis.
Proceeds from the debt and equity financings will be used to refinance
the company's existing bank debt and to provide capital to fund the company's
continued growth.
"We are extremely pleased with this important restructuring," stated
Mr. Beasley. "The new credit facility is not only larger than the one it
replaces, it also has more favorable terms, reflecting the lending community's
renewed confidence in CCA.
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"In addition to providing a sizable infusion of new equity capital, our
Board of Directors - and the daily operation of our company - will be enhanced
by the active involvement of two of the nation's most successful investment
groups. We view these as positive steps and we are looking forward to working
closely with our new partners."
"This transaction is intended to position CCA once again as a growth
company with tremendous prospects and re-establish transparency to shareholders
regarding the fundamental strength of CCA's business. Our belief is that a
greatly simplified and more efficient capital structure will allow the company
to fund future growth internally and will assist the company in maximizing
shareholder value," said Wesley R. Edens, Chairman and Chief Executive Officer
of Fortress.
Added Thomas J. Saylak, Senior Managing Director of The Blackstone
Group, "CCA is the market leader in a growing industry. We believe this capital
infusion and CCA's new corporate structure will allow the company to realize
enhanced financial flexibility to maximize growth prospects. Over time, we
believe this new direction will be recognized and rewarded by investors."
BOARD OF DIRECTORS
As part of the restructuring, the new CCA would have a 10-person Board
of Directors. Four persons would represent the Investor Group, and four persons,
including Mr. Beasley, Mr. Russell, and Jean-Pierre Cuny, would be drawn from
the existing Prison Realty Board. Two new independent directors, subject to the
approval of the Investor Group and the current board, also would be appointed.
CONDITIONS
In addition to being subject to the approval of Prison Realty's
shareholders, the transaction is subject to certain financial and non-financial
conditions, which the company expects to be satisfied prior to the closing. The
transaction will also require customary regulatory review. It is expected that
the shareholder vote would take place in March or April 2000, and that the
transaction would close in the second quarter of 2000.
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ABOUT THE COMPANIES
Prison Realty's business is the ownership of correctional and detention
facilities. The company provides financing, design, construction and renovation
of new and existing jails and prisons that it leases to both private and
governmental managers. At September 30, 1999, the company owned, or was in the
process of developing, 51 correctional and detention facilities, of which 40
facilities were operating, eight were under construction or expansion and three
were in the planning stages. At September 30, 1999, CCA leased 32 facilities
from the company, government agencies leased five facilities, and private
operators leased three facilities.
Fortress Investment Group LLC is a real estate investment and asset
management company with headquarters in New York City. Fortress was founded in
April 1998 by a group of senior professionals led by Wesley R. Edens. Fortress
manages approximately $760 million of private equity, and invests primarily in
undervalued real estate-related assets and companies on a domestic and
international basis.
The Blackstone Group is a private investment bank in New York City. It
was founded in 1985 by its Chairman, Peter G. Peterson, and its President and
CEO, Stephen A. Schwarzman. Blackstone is engaged in six business areas
including Corporate Principal Investing, Private Equity Real Estate Investing,
Mergers and Acquisition Advisory, Restructuring and Reorganization Advisory,
Private Mezzanine Investing, and Liquid Alternative Asset Investing.
Merrill Lynch & Co. acted as advisor to the Board of Directors and
Special Committee of Prison Realty, as well as the Board of Directors of CCA.
DISCLAIMER ON FORWARD LOOKING STATEMENTS
This news release contains statements that are forward looking, including
statements relating to the amount and timing of the proposed offering
transactions. These statements are not projections or assured results. Actual
results may differ materially from the results anticipated in the forward
looking statements due to a variety of factors, including but not limited to,
changing market conditions. Additional factors will be described in the
company's filings with the SEC. The company does not undertake an obligation to
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update its forward-looking statements to reflect future events or circumstances.
Accordingly, individuals should not place undue reliance on such statements.
###
NOTE: THE COMPANY WILL SCHEDULE A CONFERENCE CALL WITH ANALYSTS AND THE MEDIA
THE WEEK OF JANUARY 3 TO FURTHER DISCUSS THE TRANSACTION.
Dates Referenced Herein and Documents Incorporated by Reference
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