Where is Platinum Equity getting the money to invest $400 million more in prison telecom company Securus?

Over the last several years, Platinum Equity and its founder Tom Gores have faced significant criticism for its ownership of prison and jail telecommunications company Securus (also called Aventiv Technologies) and the high rates it charges to families of people who are incarcerated to communicate with their loved ones.

In May 2023, Bloomberg reported that as part of a deal to refinance Aventiv Technologies’ debt, Platinum Equity is contributing $400 million more in equity to the company, nearly doubling its investment in Securus (Platinum Equity previously invested $440 million in the company, Bloomberg reported).

Platinum Equity investors may wonder where that additional $400 million is coming from and why Platinum Equity is doubling down on Securus/Aventiv six years after it acquired the company and a little over a year after Platinum Equity sought to merge Securus with a SPAC. The new investment also comes as the industry faces increased regulation.

Media coverage:

• Los Angeles Times, September 2019: “Troubled companies made him billions. A prison phone investment made him enemies”
• The New York Times, October 2021: “JPay, a prison contractor, was fined over fees it charged to former prisoners”
• Pennsylvania Capital Star, September 2019: “State employee retirement board balks at investing in prison-linked private equity firm”

So where is Platinum Equity getting the money to invest $400 million more in prison telecom company Securus?

Platinum Equity CEO Tom Gores himself is worth $6.2 billion, according to Forbes. Yet Gores has faced withering criticism for Platinum Equity’s investment in Securus. In 2020 Gores stepped down from the Los Angeles County Museum of Art board after facing criticism for the investment. Gores and the NBA have also faced calls for him to sell the Detroit Pistons basketball team.

Platinum Equity owns Securus/Aventiv through its Platinum Equity Capital Partners IV buyout fund.  Yet the $6.5 billion fund was 97% called with around $200 million in capital to invest as of the end of 2022, according to data provider Pitchbook, suggesting Platinum Equity may have to look elsewhere to add $400 million more in equity to Aventiv/Securus.

Platinum Equity’s 2019 successor fund, Platinum Equity Capital Partners V, had around $1 billion left to invest as of March 2023. Yet the New York City public pension funds, one of the largest investors in the fund, in 2019 reportedly signed a side letter with Platinum Equity to let the funds opt out of future investments in the prison services industry.

Platinum Equity is also in the process of raising a new buyout fund, Platinum Equity Capital Partners VI.

Platinum Equity investors should ask where the private equity firm’s additional $400 million equity investment in prison service company Aventiv/Securus is coming from.