GEO Group: Now Teetering On The Edge Of Bankruptcy As A Prisoner To Their Debt

May 26, 2021 10:10 AM ETThe GEO Group, Inc. (GEO)159 Comments
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Summary

  • The shareholders of GEO Group have endured a terrible ride during the last twelve months with their dividends being completely suspended.
  • Now, Standard & Poor's has downgraded their credit rating even further into the junk territory and warned of a debt default, which is essentially tantamount to bankruptcy.
  • Although it would be tempting to assign blame with the new Biden administration and their plans to phase out federal use of private prisons, their leverage was already unsustainable.
  • Considering the long and questionable path forward with deleveraging through free cash flow, it seems likely that they will seek to restructure by converting debt to equity.
  • It does not bode well for their shareholders that not a single member of their management has purchased any shares during the last twelve months, and thus, I believe that a bearish rating is appropriate.

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Introduction

If utilized correctly, debt can have a wonderful and transformational effect, but as always, nothing is free, and this naturally accompanies risks with countless stories of companies becoming prisoners to their debt, a fate that ironically awaits

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DT Analysis profile picture
10.63K Followers
My analysis primarily focuses on income investments with a preference for those sporting high and very high yields.  This space often contains value traps, although it also contains very desirable opportunities that have the potential to generate significant alpha for investors.  I endeavor to help investors make their own investment selections by providing my insights into financial information released by companies in the context of the current economic outlook.  Whilst I offer ratings via this site, these should not be taken as financial advice nor to proceed with a particular investment.  Apart from my extensive personal investment experience that spans over a decade, I have also obtained a Bachelor degree with Honours majoring in Finance, minoring in Accounting.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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