Corinthian Colleges, U.S. Department of Education Agree in Principle on Transition Plan
23 Juin 2014 - 1:45PM
Corinthian Colleges, Inc. (Nasdaq:COCO) announced today that it has
reached a memorandum of understanding with the U.S. Department of
Education (the "Department") that maintains uninterrupted daily
operations at its schools, until the Company and the Department
finalize a more detailed transition plan. Corinthian currently
serves about 72,000 students at 107 campuses and online.
Corinthian and the Department agreed upon a Memorandum of
Understanding ("MOU") under which Corinthian will immediately
receive $16 million in federal student aid funds earned through
enrollment, avoiding an immediate cash shortfall that will allow
its students to continue their educational programs as planned.
Under the terms of the MOU, Corinthian and the Department will
enter into an Operating Agreement that will allow Corinthian to
proceed with its plan to pursue strategic alternatives for its
operations, including the sale and teach-out of schools in a manner
that will best protect the interests of students, faculty and
staff, ensure the integrity of federal student aid funds and
preserve the value of the schools. The Department and Corinthian
have agreed to finalize the details of the transition plan in an
Operating Agreement by Tuesday, July 1, 2014. For more
information, see the 8-K issued by the Company today.
"Throughout several days of intensive discussions with the
Department, our goal has been to protect the interests of our
students, 12,000 employees, taxpayers and other stakeholders," said
Jack Massimino, Corinthian Chairman and Chief Executive Officer.
"This agreement helps achieve that goal. We worked collaboratively
with the Department to reach consensus, and we will continue to do
so as we finalize and implement the detailed transition plan."
Under the MOU, Corinthian will identify and engage an
independent compliance and business monitor acceptable to the
Department. The monitor will have full access to Corinthian's
financial and operating records and information and report to the
Department on Corinthian's progress in the implementation of the
transition plan contemplated by the MOU.
Corinthian will continue to seek new owners for most of its
campuses with the goal of entering into definitive sales agreements
with one or more third parties for such campuses within
approximately six months, and will proceed in an orderly fashion
with the "teach-out" of schools that are under-performing or whose
continued participation in the Title IV student aid programs has
been terminated by the Department. During the teach-out
process, no new students will be enrolled at the affected schools,
but all current students will be able to complete their
instructional programs or transfer to another institution.
Background
On June 19, 2014, Corinthian disclosed in a Form 8-K that the
Department had changed the process through which it disburses
federal Title IV education funds to the company, moving from its
Advanced Payment system to financial oversight called Heightened
Cash Monitoring 1 (HCM1). As part of HCM1, the Department imposed a
21-day delay in the disbursement of Title IV funds. In its
disclosure, Corinthian said this delay, coming at fiscal year-end
when cash flows are at their lowest point, could "cause the company
to be unable to continue as a going concern." The MOU between the
Department and Corinthian maintains HCM1, but immediately disburses
$16 million in federal funds to Corinthian to avoid a sudden and
unplanned disruption of school operations.
Liquidity Needs
Although Corinthian believes the MOU is a positive step for the
Department, Corinthian and all of its stakeholders, the Company
will still need to obtain additional sources of liquidity to fund
its operations. During negotiations over the final Operating
Agreement between now and July 1, 2014, Corinthian hopes to work
cooperatively with the Department to find mutually agreeable
modifications to the 21-day delay imposed by the Department in
connection with HCM1 that will permit Corinthian to receive regular
disbursements of Title IV funds to fund its
operations. Additionally, Corinthian may continue to seek
additional sources of liquidity through new financings, additional
cost reductions, accelerated asset sales or some combination
thereof. There can be no assurance that the Department will modify
the 21-day delay as a result of the Operating Agreement, or that
Corinthian will be able to obtain any such additional needed
liquidity on a timely basis, on terms acceptable to it, or at
all.
Other
During Corinthian's discussions with the Department regarding
the MOU, the Department indicated that, in connection with its
ongoing review of Corinthian and its schools, it is considering
denial of recertification or removal of certification of
institutional Title IV eligibility with respect to certain of the
Company's schools. Many Corinthian schools hold provisional Title
IV Program Participation Agreements with the Department, and the
Participation Agreements of others has or is about to expire. The
Department may decline to renew expiring Participation Agreements
or terminate existing Participation Agreements in the event it
identifies significant institutional failures, which, depending on
the schools, could have a material adverse effect on
Corinthian.
About Corinthian
Corinthian is one of the largest post-secondary education
companies in North America. Our mission is to change students'
lives. We offer diploma and degree programs that prepare students
for careers in demand or for advancement in their chosen fields.
Our program areas include health care, business, criminal justice,
transportation technology and maintenance, construction trades and
information technology. We have 107 Everest, Heald and WyoTech
campuses, and also offer degrees online. For more information, go
to http://www.cci.edu.
Certain statements in this press release may be deemed to be
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. The company intends that all such statements be
subject to the "safe-harbor" provisions of that Act. Such
statements include, but are not limited to, those regarding the
implementation of the MOU and the transition plan contemplated by
the MOU, the negotiation of the Operating Agreement, and the
discussion under the heading Liquidity Needs. Many factors may
cause Corinthian's actual results to differ materially from those
discussed in any such forward-looking statements or elsewhere,
including: Corinthian's ability to identify new owners for its
campuses and to enter into agreements with any such new owners on
terms acceptable to the company, if at all; possible refusal of the
Department to modify the 21-day delay imposed by in connection with
HCM1 to permit Corinthian to receive regular disbursements of Title
IV fund its operations; possible inability to obtain needed
liquidity through new financings, additional cost reductions,
accelerated asset sales or some combination thereof; the company's
possible inability to comply with the terms of the MOU and related
transition plan; the company's effectiveness in its regulatory and
accreditation compliance efforts; the outcome of ongoing reviews
and inquiries by accrediting, state and federal agencies, including
the Department of Education, various attorneys general, and the
Consumer Financial Protection Bureau (CFPB); the outcome of pending
litigation against the company, including the civil complaints
filed by the California and Massachusetts Attorneys General; the
CFPB's determination regarding enforcement action against
Corinthian; increased competition; changes in general macroeconomic
and market conditions (including credit and labor market
conditions, the unemployment rate, and the rates of change of each
such item); the uncertainty of counterparty decisions in the waiver
of events of default in the credit agreement and the potential sale
of Genesis loans; and the other risks and uncertainties described
in the company's filings with the U.S. Securities and Exchange
Commission. The historical results achieved by the company are not
necessarily indicative of its future prospects. The company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
CONTACT: Investors:
Anna Marie Dunlap
SVP Investor Relations
714-424-2678
Media:
Kent Jenkins
VP Public Affairs Communications
202-682-9494
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