S&P lifts Corrections Corp., rates notes BB+

Standard & Poor's said it raised the corporate credit rating on Corrections Corp. of America to BB+ from BB.

The agency also said it assigned a BB+ rating to the company's proposed $675 million senior unsecured notes. The recovery rating is 3, indicating 50% to 70% expected default recovery.

S&P also raised the rating on the company's existing $465 million senior unsecured notes due 2017 to BB+ from BB with the recovery rating remaining at 3. These ratings will be withdrawn after the refinancing, the agency said.

The outlook is stable.

Credit metrics are expected to return to prior levels after the proposed refinancing, including leverage below 3x, even though the refinancing is increasing debt in conjunction with the REIT conversion, said Brian Milligan, an S&P analyst.

The agency said it believes internally generated cash flow will exceed shareholder distributions and the company will gradually reduce revolver borrowings following the refinancing.

The ratings reflect the company's fair business risk profile, which benefits from high barriers to entry in the private correctional industry, S&P said.

Ongoing government budget deficits and potential correctional policy changes, coupled with high customer concentration, are the principal constraining factors for ratings, the agency added.

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