When I examinedGEO Group (NYSE:GEO) last December, I noted the company's high level of debt as one of its biggest prospective risks for long-term investors. Back then, the company's long-term liabilities totaled $470 million, compared with shareholder equity of $233 million. But a recent equity offering should dramatically mitigate this risk.

Geo Group, which runs correctional, detention, and residential treatment centers, said Tuesday that it plans to sell 4.8 million shares for a predicted $209 million. The company plans to use $200 million of that to repay company debt. Though this deal dilutes existing shareholders' ownership, it might ultimately serve the greater good.

This move will lower Geo Group's debt-to-equity ratio from a rather high 1.99 to a more reasonable 0.66. There's nothing wrong with a levered business model, and the company's recent results suggest that it had no trouble meeting its debt payments. However, this move should help ensure that its debt doesn't become a bigger problem down the road.

Prison stocks have fared well so far in 2007. Geo Group is up 23% since the beginning of the year, recently reporting a monster Q4 and an increased outlook for 2007. Shareholders of Corrections Corp. of America (NYSE:CXW) have also enjoyed a successful 2007, with shares appreciating 13%. It will be interesting to see whether these two companies can maintain their momentum. But in the long run, I think Geo Group's equity offering, and how it's using the proceeds, will pay off for shareholders.

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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. The Fool's disclosure policy is always locked down.