Campaign for Prison Phone Justice

The Wall Street Journal reports that the largest U.S. operator of prison phones, Global Tel*Link Corp., is being shopped by its private-equity owner, according to people familiar with the matter.

The sales push follows a succesful campaign to cap the fees that companies like GTL can charge for interstate calls to and from inmates. The government also is weighing a cap on charges for in-state calls.

The Wall Street Journal reports:

GTL, based in Mobile, Ala., has been passed between private-equity firms over the past decade. It was sold most recently in late 2011 for about $1 billion to New York-based American Securities LLC.

It isn’t clear whether regulatory concerns were behind the firm’s decision to find a buyer for the company.

The company’s chief competitor, Securus Technologies Inc., has also changed hands among private-equity firms and last year sold for about $700 million. The deal helped seller Castle Harlan Inc. roughly double its two-year investment, according to a person familiar with that deal.

GTL and Securus have come under scrutiny in recent years for their high rates. More than a decade ago a Washington, D.C., woman petitioned the Federal Communications Commission to take action after she said she was charged $18 for a five-minute call with her grandson, who was serving a murder sentence outside the district.

In February, the FCC capped the charge for interstate inmate phone calls at $3.75 for 15 minutes. GTL charged as much as $17.30 for such calls under contracts with facilities in Arkansas, Georgia and Minnesota, according to the FCC, which said the charges resulted in “unreasonably high” phone bills for inmates’ families.

Regulators also have proposed capping charges for in-state calls. The FCC said in a public notice last September that “a significant number of [inmate] calls are intrastate, highlighting the need for reform of intrastate rates.”

GTL told the government that the cap would cause “millions of dollars in unrecoverable losses,” and that if the rule went into effect on schedule, which it did, the company would “experience considerable irreparable harm.”

A year ago, GTL sold new debt, in part to pay a $275 million dividend to American Securities and GTL management, according to Moody’s. That sum represents about three-quarters of the cash the private-equity firm put into the 2011 acquisition, according to a person familiar with the matter. At the time of the refinancing, GTL carried $885 million in debt, Moody’s said.

The Campaign for Prison Phone Justice is currently leading the effort to take on the cost of interstate calls.