Private Prison Companies On the Ropes Following Banks’ Withdrawal Announcements

Via Make the Road NY

New York (3/14/19)—The country’s leading private prison companies are on the ropes following the news that three major US Banks (JPMorgan Chase, Wells Fargo, and USBank) are pulling back from financing the sector. Since last Tuesday, when JPMorgan Chase announced it’s withdrawing from the sector, stocks of the two largest private prison companies, Geo Group and CoreCivic, have declined substantially. Geo Group’s stock price has dropped more than 15% [to $19.41] and CoreCivic’s stock price has dropped 8% [to $19.14], as of 2pm today.

In addition, a Moody’s Sector Comment noted that the JPMorgan Chase “announcement is credit negative for the private prison real estate investment trusts (REITs) [this refers to how private prison companies are structured] we rate because it signals future uncertainty regarding access to capital within the private prison industry. Additionally, exposure to continued adverse events, such as negative publicity, has been a key credit risk for the private prison business mode.”

Since JPMorgan Chase’s announcement, Wells Fargo has also committed to not renewing existing agreements or signing new ones with private prison companies. In addition, US Bank has reduced, and will continue to reduce, its credit exposure to the industry. The banks’ decisions and the growing financial weakness of the private prison companies comes after significant pressure from immigrant advocates participating in the Corporate Backers of Hate campaign and more than 100 organizations in the Families Belong Together Corporate Accountability committee to urge financial institutions to cut their financial ties with Geo Group and CoreCivic, the private prison companies responsible for terrorizing people of color and immigrant communities in pursuit of profit.

In response to the new data showing growing weakness in the private prison companies’ financial position, Javier H. Valdes, Co-Executive Director of Make the Road New York, said: “The chain reaction in big banks stepping away from private prison companies is doing major damage to Geo Group and CoreCivic. Immigrant communities and our allies are going to continue to pressure all banks to withdraw from this morally bankrupt industry, which has a tragic record of violating the rights of our loved ones.”

“Private prison companies depend heavily on debt financing because they are structured as REITs and can’t hold onto cash,” explained Kevin Connor, Director of the Public Accountability Initiative. “As more banks deem the industry too toxic to lend to, the companies’ costs of borrowing will increase and their REIT structure will become less and less viable. That’s why analysts are alarmed and stock prices are dropping.”

Roughly 75 percent of immigrants detained by ICE are held in private detention and, up until last week, JPMorgan has held more debt in the two main private prison companies (the Geo Group and CoreCivic) than any other lender. Geo Group and CoreCivic, because they are structured as REITs, are particularly reliant on financing from private banks. According to a 2018 report, Bankrolling Oppression, “At the end of 2017, 9 of every 10 dollars CoreCivic had on hand were borrowed. For GEO Group, it was 19 of every 20 dollars.”
“It should come as no surprise that supporting an industry that profits from putting people in cages and separating families does not make business sense. The plunging stock prices prove that making money off of Trump’s inhumane, racist agenda has consequences. Let this be a lesson to all the backers of hate that immigrant communities and our allies will hold businesses accountable for making money off of our pain,” stated Ana María Archila, Co-Executive Director of the Center for Popular Democracy.

Since it was launched in 2017, the Corporate Backers of Hate campaign, a project of Make the Road, the Center for Popular Democracy, Action NC, New York Communities for Change, Freedom to Thrive (previously Enlace) and other partners, has highlighted how private prisons and their financial backers have positioned themselves to gain from Trump’s immigration crackdown. In addition, since the summer of 2018, more than 100 organizations in the Families Belong Together corporate accountability committee have pressured JPMorgan Case and Wells Fargo to stop banking private prisons. The groups have organized powerful direct actions against JPMorgan Chase and Wells Fargo and delivered hundreds of thousands of petitions to the banks.

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