Private equity firm Platinum Equity is in discussions with lenders about potential changes to sweeten a $1.1 billion bond-and-loan deal that would refinance near-term debt at its prison phone and tablet company Aventiv Technologies LLC, according to people with knowledge of the matter.
Negotiations are ongoing for the $700 million leveraged loan and $400 million junk-bond offering, the people said, asking not to be named discussing private information. Commitments for the loan part of the package were due on May 12.
Aventiv needs to quickly refinance its debt because it has loans coming due in the second half of 2024. Companies typically repay debt at least one year before maturity.
Many investors tend to pass up on debt issued by prison-related businesses due to concerns over environmental, social, and governance factors. That leaves Aventiv, the parent company of brands including Securus Technologies and JPay, with a narrower group of potential participants than a typical junk-rated corporate debt deal.
Securus has been criticized in the past for charging as much as $25 for a 15-minute phone call from local jails and for requiring inmates to pay extra fees to open, fund and close accounts. Tom Gores-owned Platinum Equity, which bought the firm in 2017, has faced pressure in recent years for profiting off of incarceration and has said it is transforming the business, “to hold ourselves accountable and push our industry to answer to consumers and communities, as well as customers,” according to Aventiv’s website.
“Stakeholders have responded very positively to a multi-year transformation program that sets Aventiv apart from the rest of the industry and establishes it as an ESG leader,” said an Aventiv spokesperson in an emailed statement, citing a significant investment in providing tablets to the incarcerated, offering free weekly communications with family, and reducing per-minute rates for phone calls by 21 percent since 2019.
A representative for Deutsche Bank AG, which is leading the debt offering, declined to comment. A representative for Platinum Equity didn’t respond to requests for comment.
Crucial Refinancing
Aventiv is selling a $700 million four-year leveraged loan, for which pricing was discussed at 6 percent over the Secured Overnight Financing Rate and a discounted price of 97 cents on the dollar. The company is also selling a $400 million four-year secured junk bond, which had initial discussions for a yield of around 11 percent.
As part of the transaction, Platinum is contributing an additional $400 million of equity, Bloomberg reported. That’s on top of the roughly $440 million the private equity firm has already invested, according to deal documents seen by Bloomberg.
The new debt and equity is expected to pay down $135 million on a revolver maturing in August 2024, and refinance a roughly $1 billion first-lien loan maturing in November 2024 as well as an about $280 million second-lien loan maturing in November 2025, according to deal documents.
The equity boost will help Aventiv pare down its debt and is a signal to potential and existing investors that Platinum is committed to the business.
But that doesn’t seem to be enough for investors. Aventiv’s debt has traded at deeply distressed prices in recent months because some lenders are unsure the company will be able to successfully refinance its debt due to ESG concerns and earnings pressure. Some lenders have also tapped investment bank Evercore Inc. and law firm Gibson, Dunn & Crutcher for debt advice, Bloomberg reported in February.
