RSTW Partners announces repayment of Avalon Correctional Services, Inc. investment.  The repayment of the $10,000,000 subordinated debt investment and repurchase of RSTW's common stock investment resulted in a 9.2% IRR and 1.52 times invested capital. 

RSTW Partners partially exited its investment in Avalon Correctional Services (“Avalon”) in two separate transactions in July and December 2004, generating a 9.2% IRR over a five year investment period. Avalon is a leading developer and manager of privatized community correctional facilities and alternative correctional programming in the United States. Avalon currently manages offenders in 12 correctional facilities in 3 states, Oklahoma, Texas and Colorado. The Company specializes in programs designed to prepare offenders for their return to society and programs designed as an alternative to incarceration. Avalon is in its nineteenth year of operations.  RSTW originally invested $10,000,000 of subordinated debt and $5,000,000 of common stock in Avalon in September 1998.  Since inception, the investment generated total cash of $22.9 million to RSTW Partners or 1.52 times the original subordinated debt investment.  

Avalon Correctional Services, Inc. (Nasdaq: CITY - News) announced today that a wholly owned subsidiary of the company has completed a $19.9 million municipal bond financing transaction. The bonds bear interest at rates ranging from 8.375% to 10.25% and are repayable over a twenty-year period.

Net proceeds from the sale of the bonds will be used to fund a debt service reserve fund, pay fees associated with the issuance of the bonds, and repay certain amounts outstanding under Avalon's existing senior credit facility and subordinate debt facility. The Company will recognize a charge of approximately $414,000 against earnings in the third quarter resulting from the early retirement of the Company's subordinated debt with an investment company.

Donald E. Smith, Avalon's CEO stated "This is a very challenging time for small public companies. The continual escalation of costs associated with operating a public company creates a tremendous burden on management to develop and implement new methods of controlling the overall cost of operations. This financing is a tremendous initial step in restructuring the Company's capitalization and fixing the cost of capital associated with a portion of the Company's real estate. The proceeds from this financing will be utilized to retire debt maturing in 2005 and provide a basis to restructure and extend the Company's remaining debt. The net result of this financing is to replace short term debt with twenty year fixed rate financing with a cost below 10%."