With enrollments and revenue still falling, Corinthian Colleges is in danger of going into default, and could be looking to sell.
For-profit college operator Corinthian Colleges, whose Everest College chain has been hit hard by lawsuits, federal investigations, and spiraling enrollments, plans to retain an investment bank to "explore strategic alternatives," which is code for the possibility of merging or selling itself to another company or private equity firm.
The decision to explore strategic alternatives was precipitated by Corinthian's breaching of the terms of its bank agreements, which could force a default on its credit lines with lenders, the company said in its quarterly earnings report this morning.
In addition to the beleaguered Everest, Corinthian operates two other college chains, a technical school called WyoTech and Heald College, a career and business school. Analysts say Corinthian could look to offload those smaller schools rather than Everest, which, with its regulatory problems, could be a much tougher sell.
New enrollments at Corinthian fell 13% year over year, and net revenue dropped 11.7% to $349.8 million, below analyst estimates. For the three months ended March 31, the company reported a net loss of $79 million. In its earnings report, the company blamed its numbers on "weather-related school closures."
Corinthian isn't the only for-profit college chain facing the possibility of default. EDMC, which operates the Art Institutes, announced last week that it might breach its debt covenants as its annual earnings fell 22%. EDMC's stock has dropped more than 88% this year, among the worst in the for-profit sector.
By 11 a.m. Tuesday, Corinthian's stock had fallen 5% to $1.13.
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