GEO announced today that its Board has decided to increase its quarterly cash dividend to $0.20 per share, or $0.80 per share annually, beginning with the payment of GEO’s first quarterly cash dividend in September 2012. The declaration of each quarterly cash dividend will be subject to approval by GEO’s Board and to meeting the requirements of all applicable laws and regulations. GEO’s Board retains the power to modify, suspend or cancel its dividend policy as it may deem necessary or appropriate in the future.
MCF Acquisition and Senior Credit Facility Amendment
As previously announced, GEO has signed a definitive agreement to purchase 100% of the partnership interests in Municipal Corrections Finance, L.P. for approximately $27.0 million. In connection with the acquisition, GEO expects to redeem the current outstanding MCF bonds for approximately $67.0 million, net of bond cash reserves and inclusive of a make whole premium of approximately $15.0 million. The MCF bonds have a cash coupon rate of 8.47 percent and a net effective interest carrying cost of approximately 5.0 percent. The transaction will give GEO full ownership interest in 11 correctional properties, representing 10,000 beds, which are currently leased and operated by GEO and will save GEO approximately $155.0 million in future net cash payments, becoming accretive to earnings after 2012.GEO will finance the acquisition of the partnership interests in MCF and the redemption of the MCF bonds with a new $100.0 million, three-year term loan under its Senior Credit Facility. The new term loan will bear interest at the same rate of GEO’s existing term loans, currently LIBOR plus 3.00 percent, stepping down to LIBOR plus 2.75 percent by the end of August 2012. In connection with this transaction, GEO will also amend its Senior Credit Facility to increase its initial restricted payment basket to $50.0 million and increase the senior secured leverage ratio covenant to access the net income restricted payment basket from 2.5x to 2.75x.