FRONT STORY LEVERAGED LOANS
US shrugs off financing protests
Pressure builds on banks financing detention centres
The US leveraged loan market has appeared
to shrug off protests at the centre of a
national immigration debate that saw illegal
immigrants separated from their children,
ASûADVOCATESûTAKEûAIMûATûBANKSûlNANCINGû
companies that run detention centres.
Advocacy groups in New York gathered
on Wednesday near JP Morgan Chief
%XECUTIVEû/FlCERû*AMIEû$IMONSûAPARTMENT û
calling on the bank to stop lending to
private prison and immigration detention
companies, according to the Center for
0OPULARû$EMOCRACY ûONEûOFûTHEûPROTESTû
organisers.
Banks including JP Morgan and Bank of
America Merrill Lynch have extended more
than a combined US$2.5bn of loans and
other debt to the Boca Raton, Florida-based
GEO GROUP and Nashville, Tennessee-based
CORECIVIC, operators of private prisons and
detention centres.
Immigration is the subject of a heated
NATIONALûDEBATEûAFTERû0RESIDENTû$ONALDû
Trump in April signed a memorandum
ending the policy known as ‘catch and
RELEASE ûINûWHICHûILLEGALûIMMIGRANTSûWEREû
not held while awaiting a court hearing.
Massive protests followed after
accompanied children were separated from
their parents at the border. Following a
court order, the government said on
Thursday that around 1,400 of the
approximately 2,500 children separated
from their parents had been reunited with
their families, Reuters reported.
Advocates are now turning their attention
to the banks backing detention centres.
h4HEû7ALLû3TREETûlRMSûAREûINûSOMEûWAYSû
hiding behind the veil,” said Ana Maria
Archila, co-executive director of the Center
FORû0OPULARû$EMOCRACYûh7ITHOUTûTHESEû
investments, these companies simply
COULDNTûOPERATEv
$ESPITEûTHEûPROTESTS û'%/û'ROUPSû
US$792m term loan has held steady, quoted
at 99.75-100 cents on the dollar on Thursday,
unchanged from Tuesday, according to two
SOURCESû#ORE#IVICSû53MûTERMûLOANûISû
not widely quoted.
“You do have categories of investments
that are toxic,” said Richard Farley, chair of
LEVERAGEDûlNANCEûATûLAWûlRMû+RAMERû,EVINû
.ATAmISûû&RANKELûh"UTû)ûDONTûSEEûANYû
evidence that the [US Immigration and
Customs Enforcement (ICE)] issue is
anywhere near a level of toxicity where
banks would be concerned with
reputational risk.”
$IMONûSENTûAûMESSAGEûONû*UNEûûTOûALLû53û
JP Morgan employees saying the bank
strongly supports US immigration reform,
noting the problems are “tearing apart our
body politic and damaging our economy,”
according to the memo.
He noted that the Business Roundtable, a
GROUPûOFû53ûCHIEFûEXECUTIVEûOFlCERSûTHATûHEû
chairs, had released a statement urging “the
Administration to end immediately the
policy of separating accompanied minors
from the parents. This practice is cruel and
contrary to American values.”
*0û-ORGANûHELPEDûlNANCEûBOTHû'%/û
'ROUPûANDû#ORE#IVICû".0û0ARIBAS û"!-, û
Barclays, SunTrust and Wells Fargo also led
'%/SûlNANCING ûWHILEûAûGROUPûINCLUDINGû
3UN4RUST û"!-,ûANDû0.#ûJOINEDû*0û-ORGANû
INûARRANGINGû#ORE#IVICSûCREDITûFACILITY û
ACCORDINGûTOûREGULATORYûlLINGS
A JP Morgan spokesperson declined to
comment.SERIOUS SITUATION
Wells Fargo said it respects the seriousness
OFûTHEûCOUNTRYSûONGOINGûDEBATEûABOUTû
immigration and the criminal justice
system.
“However, we do not as a corporation take
positions on public policy issues that do not
DIRECTLYûAFFECTûOURûCOMPANYSûABILITYûTOûSERVEû
customers and support team members,” a
bank spokesperson said.
Spokespeople for other lenders either
declined to comment or did not return calls
seeking comment.
“It is understood that banks are largely
comfortable with lending to the sector atthis time, but many have ongoing review
processes based on the publicity
surrounding the issue,” a senior banker said.
A CoreCivic spokesperson did not respond
to an email seeking comment. In June the
company released a statement that said it
does not advocate for or against legislation or
policies and does not enforce immigration
laws or policies. It said that none of its
facilities provides housing for children that
are without parental supervision.In an April lender presentation to cut its
INTERESTûPAYMENTS û'%/û'ROUPûOFFEREDûANû
industry overview of immigration
enforcement, according to a source. It
HIGHLIGHTEDû4RUMPSûEXECUTIVEûORDERûTOûENDû
@CATCHûANDûRELEASEûASûWELLûASûADDITIONALû
government funding available for more
detention beds.
-OODYSû)NVESTORSû3ERVICEûONû4UESDAYûSAIDû
'%/û'ROUPSû"ûCORPORATEûFAMILYûRATINGû
REmECTSûITSûSOLIDûLIQUIDITYûPOSITION ûSTABLEû
operating performance and increased
capital market access.
'%/û'ROUPûISûAûLONGSTANDINGûSERVICEû
provider to the government and does not
have a role in setting criminal justice or
immigration policies and does not advocate
for or against criminal justice or
immigration enforcement and detention
policies, a company spokesperson said in an
emailed statement. He said the facilities it
manages on behalf of the federal
government have never housed
unaccompanied minors.
,ASTûYEARû-OODYSûREVISEDû'%/û'ROUPSû
rating outlook to stable from negative and
#ORE#IVICSûOUTLOOKûTOûSTABLEûFROMûNEGATIVEû
AFTERû!TTORNEYû'ENERALû*EFFû3ESSIONSû&EBRUARYû
2017 memorandum, reversing the US Justice
$EPARTMENTSû!UGUSTûûPLANSûTOûPHASEûOUTû
its use of privately-operated prisons.
Kristen Haunss, Jonathan Schwarzberg, Yun LiLOANS
Australia China India 58 Hong Kong 59 Indonesia 59 Malaysia Vietnam Czech Republic û France û
Germany Netherlands Spain UK United States Leveraged Loans û Restructuring 72“The Wall Street firms are in
some ways hiding behind the
veil. Without these investments,
these companies simply
couldn’t operate”
“It is understood that banks
are largely comfortable with
lending to the sector at this
time, but many have ongoing
review processes based on the
publicity surrounding the issue”