Barclays, KeyBanc Pull Out of Muni Sale for Private Prisons

Danielle Moran and Amanda Albright
·3 min read

(Bloomberg) -- Barclays Plc pulled out of its role as the lead underwriter of a municipal-bond sale that was set to build prisons for CoreCivic Inc. after criticism that the bank was backtracking on a pledge to no longer provide financing to for-profit jail companies.

KeyBanc Capital Markets, another manager, also said it was resigning from the transaction.

The $634 million bond issue was set to be sold through a Wisconsin agency to raise money for a CoreCivic-owned company that was planning to build two prisons in Alabama. The facilities were set to be leased and run by the state’s Department of Corrections.

The bank’s lead role in the deal drew controversy because it appeared to be at odds with Barclays’ announcement two years ago that it would no longer provide new financing to private prison companies, whose model of profiting from incarceration has drawn controversy 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.

Bloomberg News was first to report Barclays’ involvement in the muni-bond deal earlier this month.

“We have advised our client that we are no longer participating in the transaction intended to provide financing for correctional facilities in the State of Alabama,” Barclays said Monday through a spokesman in an emailed statement. “While our objective was to enable the State to improve its facilities, we recognize that this is a complex and important issue. In light of the feedback that we have heard, we will continue to review our policies.”

KeyBanc Capital Markets has “resigned” from the transaction, a bank spokesperson said via email. A representative for Stifel Financial Corp., another underwriter, didn’t immediately respond to a request for comment.

Spokespeople for CoreCivic and the Alabama Department of Corrections did not immediately respond to requests for comment.

The banks’ decisions to pull out of the transaction is highly unusual for the municipal-debt market, given that the debt was initially set to be sold last week and pricing levels were already being circulated among potential investors.

Barclays had said that its role as underwriter wasn’t at odds with its 2019 decision because the money was financing facilities that would be run by Alabama. The state’s officials said the deal with CoreCivic will help it improve conditions within its prison system after the state and its corrections department were sued by the U.S. Justice Department in December for failing to protect male prisoners from violence and unsanitary conditions.

Related: Barclays Bond Deal Shows Limits to Vow on Financing Prison Firms

But Barclays drew fire from advocacy groups and the public portion of the debt sale was reduced last week, a step that usually indicates that a bank is having difficulty lining up buyers for securities.

Last week, the American Sustainable Business Council and partner organization Social Venture Circle, which represents 250,000 businesses to advocate for responsible practices and policies, announced Thursday they would refund Barclays’ membership dues. Barclays joined the group in 2019.

“We applaud Barclays’ decision to not underwrite the Alabama private prison bonds,” said David Levine, president of American Sustainable Business Council in a statement on Monday. He said that he invites the bank and other financial institutions to “chart a responsible and beneficial path forward for investing and rebuilding our communities, and our economy.”

Related: Barclays Kicked Out of Business Group Over Prison-Bond Work

(Adds statement from American Sustainable Business Council in last paragraph)

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©2021 Bloomberg L.P.

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    Top news and what to watch in the markets on Monday, April 19, 2021.

  • Cuba's Communist Party chooses Miguel Díaz-Canel as leader

    In many ways, Cuba's new maximum leader is nothing like those who have governed the island for the past six decades. Miguel Díaz-Canel was never a guerrilla fighter and was for only a few years, like all Cubans of his generation, a soldier. On Monday, Cuba's Communist Party congress — as expected — chose Díaz-Canel to be its leader, adding that crucial post to the title of president he assumed in 2018.

  • U.S. Supreme Court brings end to another Republican election challenge

    The U.S. Supreme Court on Monday brought an end to another lawsuit related to the Nov. 3 presidential election filed by a Republican former congressional candidate who had challenged the extension of Pennsylvania's deadline to receive mail-in ballots. Bognet, who lost his race for a seat in the U.S. House of Representatives to Democratic rival Matt Cartwright, and the voters had filed the suit before the election, challenging a Sept. 17 ruling by Pennsylvania's top court ordering officials to count mail-in ballots that were postmarked by Election Day and received up to three days later.