In a filing last week with the Securities & Exchange Commission, the Prison Realty Trust, a real-estate investment trust (REIT), announced that as part of a "Waiver and Amendment" with its creditors, the company will securitize the leases associated with its Agecroft detention facility in the United Kingdom.

Under the terms of the amendment, the transaction, which will exceed GBP45 million in net proceeds (or the corresponding U.S. dollar amount on the day of closure) must close before Feb. 28, 2001. Currently, GBP45 million equals roughly US$68 million.

Prison Realty's credit line is a $1 billion senior secured facility led by Lehman Commercial Paper Inc.

Agecroft is an operating facility, currently housing inmates, which is being leased by a government body in the United Kingdom, said an analyst covering Prison Realty.

"My understanding is that it's a high quality cash flow stream since it's being guaranteed by governmental authority," the source said.

According to the analyst, Prison Realty has been in rocky financial standing for the past year or so - hence the recent amendment which waives existing defaults on the company's credit line.

"You might say they're a hardened company," the analyst said. "They've sort of had a major high-profile blowup in the company history."

Two primary entities make up the company: Prison Realty Trust and an affiliated management corporation, the Corrections Corporation of America (CCA).

In Jan. 1999, Prison Realty acquired CCA and spun off several smaller operating facilities, the primary one being CCA, which became a private company.

"They've basically got some real issues as to the viability of their operating model, and their ability to meet their financial commitments," the source added. "At different times in their history [Prison Realty and CCA] have been independent, and at other times, they've been merged."

Nashville-based Prison Realty declined to comment on the specifics, only stating that the securitization "is more of a fourth quarter event."

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