US investment bank Jefferies is privately trying to sell shares in a controversial government contractor, which has drawn criticism for operating a centre that has housed migrant children separated from their families at the US border.
The private equity owners of Caliburn International are looking to sell a 75 per cent stake in the business, which has grown rapidly by acquiring and combining several government contractors. The company — backed by former Wasserstein Perella banker Thomas Campbell’s DC Capital — last month shelved plans to sell shares publicly in an initial public offering, instead switching to a private share sale that could raise up to $583m, according to people familiar with the matter.
Jefferies is the “sole placement agent” on the Virginia-based company’s deal, which it is aiming to wrap up before the end of April. Documents accompanying the share sale warn potential investors that Caliburn operates “in a number of challenging and politically charged environments”, going on to detail the negative press attention around its “work with UACs” — a three-letter acronym for “unaccompanied alien children”.
Its subsidiary Comprehensive Health Services (CHS) operates the “Homestead Temporary Shelter for Unaccompanied Children” in Florida, a large facility that houses migrant children who arrive at the US-Mexico border without their parents.
Last year Homestead also housed some children separated from their families under US president Donald Trump’s contentious immigration policy, and since then has become the site of protests outside from campaigners opposing it.
The contract is worth $285m, according to the documents, and Forbes reported last month that CHS is the US’s only for-profit youth migrant shelter operator.
Wall Street banks have come under increasing pressure for helping controversial businesses raise financing, as investors grow more sensitive to the ethical implications of their investments. Some lenders have publicly pulled back from contentious sectors, with JPMorgan Chase last month axing lending to private prison operators.
Ana María Archila, co-executive director of the Center For Popular Democracy, has criticised investment banks for working with companies involved in Mr Trump’s family separation policy, telling the Financial Times that there is “no moral grey-area in traumatising children”.
“Companies should not be bidding on government deals to put children in cages, and financial institutions should not be financing and profiting from this morally bankrupt policy,” she said.
Caliburn International said it was required to accept any unaccompanied minors the US government had submitted to its custody. “The safety and welfare of unaccompanied minors at the Homestead facility is a top priority. We operate in full compliance with all applicable laws and regulations.”
If successful, Jefferies stands to make $32m through a placement fee and share discount in Caliburn, according to documents seen by the Financial Times. Jefferies declined to comment.
Jefferies was also in the spotlight this week for a controversial loan deal arranged for an Israeli cyber security company that has been criticised for allegedly providing spyware to target political dissidents. Herzliya-based NSO Group paid $51m in fees and expenses for its loan sale, according to an investor who has seen the presentation accompanying the deal, which wrapped up on Tuesday.
Jefferies and fellow underwriter Credit Suisse are set to lose money, however, as most debt investors balked at NSO’s deal owing to corporate governance concerns.
Caliburn generates most of its revenue in Iraq, where its subsidiary Sallyport helps run the US Air Force’s Balad Air Base. The company is pursuing a defamation claim against two former employees who alleged that the company disregarded wrongdoing at this facility.
The Department of Justice is investigating whether Sallyport’s former management knew about improper payments a partner on its contracts allegedly made to Iraqi government officials.