Associated Press Financial situation should not damage future of facility
HELENA (AP) - The company that owns Montana's new private prison has arranged a $200 million deal to solve financial trouble that has deepened for several months, analysts and observers report.
Prison Realty Trust Inc. - formerly Corrections Corp. of America, which runs the Shelby prison - says Pacific Life Insurance Co. has agreed to invest up to $200 million in the company, the Great Falls Tribune reported Friday.
A state prison official said Thursday his agency has been monitoring CCA's financial situation since last year, and that it should not damage the future of the 500-bed Crossroads Correctional Center at Shelby.
Joe Williams, head of the Corrections Department's Administrative Services Division, said if CCA or its parent company should go bankrupt, the contract with Montana allows the state to take over administration of the prison. After that the state might seek another private prison contractor to run the prison.
"There are certainly other private prison companies that could come in and take over the management and operation of the facility, if that were to happen," he said.
CCA, based in Nashville, Tenn., and the largest private prison company in the world, won the contract to build and operate Montana's first private prison in 1998. The facility opened southwest of Shelby last October. As of this past week it held 280 male inmates and 46 female inmates.
About the same time CCA won the contract, it underwent a corporate reorganization, converting its parent company to a "real estate investment trust," Prison Realty Trust Inc.
The new parent company became the owner of the prisons, and CCA became a related private company that operated the prisons and paid rent to Prison Realty.
But an analyst for Legg Mason Wood Walker in Baltimore told the Tribune that Prison Realty had set the rents too high and CCA didn't have enough cash to pay them. When the problems were revealed last spring, Prison Realty's stock plummeted.
Prison Realty's stock dropped from about $22 a share to as low as $2.16 a share last year. Friday, it closed at $3.31 per share.