New USMS Agreement. Yesterday, CoreCivic announced the U.S. Marshals Service (USMS) had entered into an agreement to utilize the Company's 1,692-bed Cimarron Correctional Facility. This facility was going to be idled due to decreased inmate populations from COVID and a reduced government budget in Oklahoma. The new management contract with USMS will allow the Company to transition the facility's mission without significantly disrupting operations.Details. The new management contract commenced on September 15th and has an initial term of three years, with unlimited 24-month extension options thereafter upon mutual agreement. CoreCivic expects to begin accepting offender populations into the facility on the contract commencement date, and to incur $0.4 million to $1.5 million in start-up expenses related to the activation of the new management contract over the next several months. Although financial details were not released, federal contracts generally have better terms for CoreCivic than state contracts.What Do New ICE and USMS Contracts Suggest? Yesterday's announcement follows recent renewals by ICE at various facilities. To us, USMS and ICE, by their actions, appear to be projecting a future where privately owned beds still will be needed to enable these Federal government entities to perform their missions, which is a net positive for CoreCivic.Alabama Update. Earlier this month, the Alabama Department of Corrections (ADOC) announced that CoreCivic had been selected to enter into negotiations to construct two of the three new facilities for the ADOC. The ADOC expects financial close for the facilities to occur in late 2020, at which time the final financial terms will become publicly available. Construction is expected to begin in early 2021, assuming negotiations are successful.Maintain Outperform. We are maintaining our Outperform rating and our $15 price target. We continue to believe the company, with its government clients, will make it through the COVID crisis with limited financial impact. And, significantly, we believe the value of CoreCivic's assets substantially exceed the current stock price.Read More >>