NEW YORK TIMES: Corinthian Colleges’ Lean Business Model Leaves Little for Creditors

Career College Central Summary:

  • Corinthian Colleges, the for-profit education company familiar to corporate law professors for its appearance in textbooks about securities regulation, now has a chance to appear in bankruptcy and restructuring texts as well.
  • Corinthian filed for Chapter 11 bankruptcy protection in Delaware on Monday, along with two dozen affiliates. Its petition lists more than $100 million in debt owed to its secured lenders and at least $100 million more in unsecured debt. Its liabilities include $1.25 million in “trade debt” owed to Barclays Capital, most likely connected to Barclays’s attempts to sell the company, and hundreds of thousands of dollars owed to a host of law firms, which have handled an onslaught of litigation. Corinthian also owes an “unknown” amount to the Department of Education. It listed assets of $19.2 million.
  • Corinthian, based in Santa Ana, Calif., has been operating since July under a board-appointed chief restructuring officer, William J. Nolan, an employee of a large consulting firm. It has also been overseen by a monitor appointed by the Education Department, Patrick Fitzgerald, a former prosecutor who is now a partner at a leading law firm.
  • It has been a long slide for Corinthian, once a Wall Street darling. The company, founded in 1995, bought more than a dozen struggling vocational colleges and by 2010 enrolled more than 110,000 students online and at 100 Everest College, Heald College and WyoTech campuses nationwide. But federal and state regulators accused it of falsified placement rates, deceptive marketing and predatory recruiting, particularly of low-income students. The last of its campuses closed in late April.
  • The main question for creditors is whether there is anything for them to recover.
  • This includes various student groups, which have proclaimed their intent to continue to sue Corinthian and hold it responsible for what they describe as a systematic pattern of misleading students to borrow money to attend.

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