Analysts at Fitch Ratings still think the longer-term financial prospects for the private prison sector are attractive. They also say Nashville-based Corrections Corp. of America has room to lever up if it wanted to buy or build new facilities. But they're not so thrilled about how the company's planned conversion to a real estate investment trust would eat up cash.

Fitch estimates the enhanced dividend stream will more than offset the potential tax savings and deteriorate the free cash flow (FCF) profile by roughly $90 million as compared to the pre-REIT conversion company. This will restrain the company's ability to build more than one new correctional facility per year with FCF, and it will increase reliance on consistent capital market access to grow and refinance indebtedness.