Core Civic

CoreCivic: Credit downgrade follows negative ESG performance as political risk grows

September 11, 2019

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Following a March Research Brief detailing a bear case for CoreCivic, Fitch Ratings announced a downgrade of CoreCivic in July. Fitch cited weak access to capital as a reason for its downgrade, after lenders including JPMorgan Chase, Bank of America, and SunTrust Banks said they would stop providing loans to private prison operators.

  • On the equity side, CoreCivic has underperformed due to multiple compression— reflecting elevated policy risks and aforementioned ESG considerations
  • While the particular situation for private prison operators: declining SLO, potential market peak – is unique, the linkage between ESG performance and credit risk is not
  • Credit risk is associated with ESG performance, according to 2019 Wharton research published in the Journal of Applied Corporate Finance
  • Perhaps the most dire possibility for private prison operators is the election of a progressive or liberal Democrat to the presidency; according to bookies, those odds are increasing
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