Doc Crant, the co-founder of Prison Realty Trust Inc. (PZN) and its predecessor company, has resigned from the company's board and his post as vice chairman. He intends to remain chief executive of Prison Realty and its primary tenant, Corrections Corp. of America, until a new CEO is named.
A release from Prison Realty said that "it is anticipated that a new CEO will be named in the near future."
His departure from the company had been expected. In fact, each of the restructuring plans considered by the company's board have been conditioned on the departure of Mr. Crants.
Earlier this year, co-founder Tom Beasely assumed the chairman's post after cash-flow problems at CCA threatened the financial viability of both companies.
Just last week, Prison Realty, an owner of correctional facilities, said that it would seek to restructure itself without a guaranteed "backstop" from Pacific Life Insurance Co. for a proposed $200 million equity infusion. The current plan entails merging Prison Realty and CCA, and dropping the company's status as a real estate investment trust beginning in fiscal 2000.
Prison Realty and CCA have been through several major restructurings in recent years. The splitting of the company into a REIT and a management company (CCA) followed shortly after a failed campaign by Mr. Crants to get the state of Tennessee to award a statewide prison contract to his company. The hard-fought, but ultimately fruitless, effort seemed to diminish the company's prospects of winning large state-wide contracts in other parts of the country.
Last month, Prison Realty said it was awarded federal contracts generating $750 million of revenue over 10 years.
Also on Wednesday, Standard & Poor's lowered its corporate credit rating and its bank loan rating on Prison Realty to 'B' from 'B+.' The senior unsecured debt rating on the company was lowered to 'CCC+' from 'B-.' The downgrades pertain to $1.1 billion of debt.
S&P said that the rating changes were due to Prison Realty's termination of the agreement with Pacific Life, which S&P believes "decreases the likelihood of Prison Realty receiving a significant equity infusion to reduce its outstanding debt. Since Pacific Life did not deem the recent amendments to Prison Realty's $1 billion bank agreement acceptable, Pacific Life decided not to proceed with its restructuring proposal, which would have included a $200 million rights offering."
Prison Realty shares were off 25 cents Wednesday, settling at $2.81. Their 52-week range is $2-$14.19.
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