(Bloomberg) -- Prison-food vendor TKC Holdings Inc. priced an almost $500 million loan Thursday as investors grow increasingly hesitant to fund companies that profit from mass incarceration.
The firm, which is owned by private equity firm HIG Capital, lowered the interest rate on the loan by 50 basis points to 5 percentage points over the Secured Overnight Financing Rate, according to people with knowledge of the matter who asked not to be identified because the information is private. Jefferies Financial Group Inc. led the sale.
It’s the latest prison company to tap the debt market amid increasing backlash on the industry. In July, prison communications provider ViaPath Technologies completed a $1.38 billion refinancing transaction after pausing the process due to new regulations on call pricing from the Federal Communications Commission.
The St. Louis, Missouri-based company is one of the country’s largest suppliers of commissary, food and telephone services to the prison and corrections industry.
In 2022, TKC sold a leveraged loan with a 12% yield, a high level rarely seen in the market, in an offering structured as a “payment-in-kind” deal where the issuer could choose to pay the coupon in cash or debt.
HIG Capital had previously struggled to attract investors in a leveraged loan deal to refinance in 2021, forcing TKC and its bankers to shift more of its $1.625 billion financing package to the bond market. The move to include more bonds, which pay a higher rate than loans, increased the overall borrowing cost of the deal. Once-loyal investors were wary due to the environmental, social and governance commitments issues and from increasing scrutiny over the industry, Bloomberg previously reported.
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