by Jon Berke
ITT Educational Services has engaged Alvarez & Marsal for assistance exploring restructuring options, said two sources close to the situation.
The Indianapolis-based for-profit school operator announced yesterday that it would discontinue academi
operations following a Department of Education ruling rendered late last week that would deprive ITT of the ability to offer financial aid to incoming students unless by 24 September it posts an additional USD 400m in surety – on top of the USD 94.4m it already posted.
“We have advisors assisting the company. However, we have non-disclosure agreements in place so we can’t comment,” said ITT spokesman Nichole Elam in a statement e-mailed statement to Debtwire.
The ruling and subsequent announcement prompted speculation that ITT would need to liquidate its business. The blueprint has been mapped out in other for-profit educations restructurings. ATI Holdingswound up filing for Chapter 7 liquidation while FCC Holdings and Corinthian Colleges both got liquidated in Chapter 11 cases that began in 2014. Corinthian struck a deal prior to its bankruptcy to sell 56 of its schools to Zenith Education Group, while the resulting liquidation plan confirmed last August would result in USD 4.3m being set aside for former students. Elsewhere, DOE also set up a program to forgive Corinthian’s student debt.
For its part, ITT could file a Chapter 11 process in order to get some return to its creditors and also since its real estate might have some value, said the sources. The company had USD 77.99m in cash on 30 June, down from USD 130m at the end of 2015. The company had 137 campus locations in 39 states as of 30 June. It valued its property and equipment at USD 142m on 31 December 2015 as opposed to USD 157m, year-over-year.
ITT’s current capital structure comprises USD 34.2m drawn under a credit facility with Cerberus Capital Management. The company had two private education loan programs—PEAKS Private Student Loan Program and CUSO student loans—that it had a fair value of USD 69m as of 30 June, down from USD 81.335m at the end of 2015.
As reported, the company has been involved in numerous federal and state lawsuits concerning fraudulent lending from those two programs.
Messages left for officials at Alvarez & Marsal were not returned. Secured lender Cerberus declined comment.