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Barclays drop prison bond contract at last minute after Furor

(Bloomberg) – Barclays Plc has stepped down from its role as lead underwriter in a municipal bond sale that was to build prisons for CoreCivic Inc. after criticizing the bank for reneging on its promise to stop providing financing to KeyBanc Capital Markets, another director, also said he was resigning from the transaction. The $ 634 million bond issue was due to be sold as early as last week through an agency in the Wisconsin to raise funds for a CoreCivic-owned company that was planning to build two prisons in Alabama. The facilities were to be leased and managed by the state’s Department of Corrections. The bank’s lead role in the deal sparked controversy as it appeared to be at odds with Barclays’ announcement two years ago that it would no longer provide new funding to private prisons. companies, whose profit model of incarceration has been controversial for years. Other banks, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., also said at the time that they were severing ties with the industry. dropping the deal was highly unusual and may reflect the growing influence of investors pouring into social purpose investment funds, creating a lucrative and growing business that financial institutions are eager to court. the first to report Barclays’ involvement in the muni-bond deal earlier this month. We have informed our client that we are no longer participating in the transaction to provide funding for the state of Alabama prisons, ”Barclays said Monday through a spokesperson in a statement sent. by e-mail. “If our goal was to enable the state to improve its facilities, we recognize that this is a complex and important issue. In light of the comments we have heard, we will continue to review our policies. KeyBanc Capital Markets has “resigned” from the transaction, a bank spokesperson said by email. A representative of Stifel Financial Corp., another underwriter, did not immediately respond to a request for comment. The withdrawal of the banks might not derail the project, although the departure of the main underwriter will almost certainly delay funding. Alabama Gov. Kay Ivey, a Republican who led the prison overhaul, said in a statement the state was disappointed with the decision but would push the plans forward. continues its efforts to “provide modern and desperately needed prison infrastructure to replace dilapidated and aging facilities.” “Reckless and irresponsible activists who claim to represent the interests of incarcerated people are in fact arguing for outdated facilities, less rehab space and potentially dangerous Selling taxable municipal bonds is expected to provide about 68% of funding totaling $ 927 million , according to investor roadshow documents dated March 31. These plans provided for the potential sale of $ 215.6 million in issued debt through a private placement and equity contribution from CoreCivi v. Barclays had defended its work on the deal, saying it was not at odds with its 2019 decision because the money was funding facilities that would be managed by Alabama. State officials said the deal with CoreCivic would help it improve conditions in its prison system after the state and its prison department were sued by the US Department of Justice in December for failing to failing to protect male prisoners from violence and unsanitary conditions. statement that the new facilities would be safer and provide safer correctional environments. “These new facilities, which will be leased, staffed and operated by the state, are critical to the state’s public infrastructure needs and will be transformative to meet the Department of Alabama. Related: Agreement on Barclays bonds show limits to vow on financing of prison companies Barclays has nonetheless drawn fire from advocacy groups and the public portion of the debt sale was cut back last week, a step which generally indicates that a The bank is struggling to find buyers for securities. The Board and partner organization Social Venture Circle, which represents 250,000 companies to advocate for responsible practices and policies, have announced that they will reimburse Barclays membership dues. Barclays joined the group in 2019. “We applaud Barclays’ decision not to underwrite Alabama private prison bonds,” David Levine, chairman of the American Sustainable Business Council, said on Monday. He said he calls on the bank and other financial institutions to “chart a responsible and beneficial path to invest and rebuild our communities and our economy.” Related: Barclays Kicked Out of Business Group Over Prison-Bond Work (Added Alabama Governor Commentary Starting at Ninth Paragraph & CoreCivic Commentary at 10th Paragraph) For more posts like this please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP



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