Underwriters back out of Alabama prison construction project

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File image(Source: WSFA 12 News)
Updated: May. 10, 2021 at 5:36 PM CDT
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BIRMINGHAM, Ala. (WBRC) - Three underwriters for Alabama’s prison construction plan have withdrawn from the project. The financing was obtained by prison giant CoreCivic, tapped to build and lease two of the three mega-prisons in the state.

A spokesperson with the financial corporation STIFEL confirmed the information Monday.

“This transaction ceased weeks ago when it was withdrawn from the market by Barclays, the lead underwriter,” Neil Shapiro wrote in an email to WBRC. “We are no longer engaged with the parties associated with financing this project.”

In February, Governor Kay Ivey signed 30-year leases with CoreCivic to construct mega-prisons in Elmore and Escambia counties. Two months later, Barclays, the lead underwriter, and KeyBanc Capital Markets announced they were no longer funding the project. At the time, CoreCivic had not secured new underwriters.

Economist Kevian Deravi says this situation could raise the interest rates on the project, and ultimately the overall cost.

“That means that interest cost to the state would be higher than a traditional investment at this point in time,” he explained.

The financial terms of the leases aren’t final until this funding is secured.

The governor’s lease-to-own prison plan has been questioned by lawmakers and prison activists. A lawsuit recently filed against Ivey alleges the governor doesn’t have the authority to incur debt on behalf of the state. The Alabama Department of Corrections called the claims in the lawsuit baseless and unsupported.

WBRC reached out to CoreCivic, Governor Kay Ivey’s Office, and the Alabama Department of Corrections (ADOC) to determine what this means for the future of this project.

ADOC gave the following statement to WBRC:

The State remains committed to comprehensive efforts underway to transform its correctional system and address vital infrastructure needs. Regarding your inquiry, CoreCivic is responsible for obtaining financing for this project – as such, any questions on this matter should be directed to CoreCivic’s team.

The Governor’s Office is still negotiating the terms of a lease to construct a third mega-prison in Bibb County.

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