Shareholders of Prison Realty Trust and Corrections Corporation of America last week approved a plan to restructure the two companies into one public entity in an attempt to prevent the nation's largest private prison business from going bankrupt.
Once a Wall Street darling, CCA started its descent after Prison Realty was spun off in 1997 to buy and lease prisons that CCA managed. In 1999, the companies established a real estate investment trust (REIT) to raise capital.
Initially, the stock did well, but instead of expanding with the proceeds, Prison Realty borrowed money to build prisons and finish those already under construction. The company got hurt when the REIT market soured -- losing $200 million and accumulating debts exceeding $65 million in less than two years.
The company's stock also dropped from a high of $22 per share in 1999 to $2, where it closed unchanged Tuesday on the New York Stock Exchange.
The newly formed public company will be known as CCA.
The merger will likely get completed by attorneys before month's end, said John Ferguson, the former state finance commissioner who was hired last month to head the troubled company.
The new company likely will hold a shareholders' meeting in the fall to select a new board of directors, Ferguson said.
The company also announced a tentative settlement to $120 million in lawsuits filed by shareholders over the company's stock dive. A federal judge Tuesday denied a request from some shareholders to stop the stock buyback.
Ferguson said the company also will focus on restructuring its debt, filling empty prison beds, getting rid of prisons that aren't profitable and no longer building jails on speculation.