Corinthian Colleges to sell Heald campuses; credit agreement amended

By Caroline Salls

Pittsburgh, June 30 – Corinthian Colleges, Inc.’s board of directors approved a plan to sell all of its Heald campuses, according to an 8-K filed Monday with the Securities and Exchange Commission.

The company said it has not yet secured a buyer for all or any subset of the Heald Schools but has allocated internal resources to identify potential buyers and evaluate proposals for these campuses. Corinthian said it intends to execute definitive sales agreements with one or more third parties for the sale of the Heald Schools within about six months.

Until the sale is completed, the Heald Schools will be accounted for as discontinued operations, the 8-K said.

Amendment terms

In addition, Corinthian said it entered into a waiver and second amendment to its credit agreement with agent Bank of America, NA.

Under the amendment:

• The lenders have agreed to allow the company to draw down the remaining $9 million of availability under the credit agreement. The lenders previously refused to fund the drawdown because of the previously reported letter from the Department of Education that imposed a 21-day delay in the company’s processing of Title IV funds.

• The applicable rate for any Eurodollar committed loan or letter-of-credit fee increased to 1,575 basis points, and the applicable rate for base rate loans increased to 1,475 bps;

• The frequency of letter-of-credit fee payments was increased to monthly from quarterly, with a 7% portion payable in kind and capitalized and the remainder payable in cash;

• The timing of required reductions in the maximum outstanding credit extensions under the credit agreement was modified so there is no required reduction until Sept. 30, at which time the company must repay loans or other obligations to the extent the total amount of those obligations exceeds $100 million;

• The sublimit for domestic letters of credit was reduced to $30 million from $50 million;

• The maturity date was amended to Dec. 31, 2014 instead of July 1, 2015;

• No further extensions of credit will be available after entry into the second amendment, except for letters of credit and acceptances issued, extended or renewed concurrently with a voluntary prepayment of committed loans or termination of existing letter of credit or acceptance and in an amount not in excess of the prepayment or terminated letter of credit or acceptance;

• The definition of domestic collateral was amended to increase the percentage of stock of the company’s non-U.S. subsidiaries that is pledged as security to 100% from 65%;

• William Nolan or another representative of FTI Consulting, Inc. must be hired as chief restructuring officer by July 1;

• A restriction on dispositions was amended so the company would need the consent of the required lenders to make any disposition or enter into any agreement to do so other than in the ordinary course of business in connection with assets with a fair market value of less than $50,000;

• Specified financial covenants were amended so they do not apply to the period after the entry into the second amendment;

• Events of default were amended to increase the threshold for a cross default related to any debt or guarantee under specified agreements or other student note programs to $30 million from $10 million; and

• It will now be an event of default under the credit agreement if the Department of Education fails to fund $16 million included in the memorandum of understanding in full by June 25 or if the memorandum is terminated or modified without the lenders’ consent, if the company fails to enter into an operating agreement with the Department of Education in consultation with the lenders and containing sales milestones satisfactory to the lenders or if the company fails to comply with the operating agreement or if that agreement is terminated or modified without the lenders’ consent.

In connection with the second amendment, the company paid in kind an amendment fee equal to 2.07% of each lender’s commitment.

Corinthian Colleges is a Santa Ana, Calif.-based post-secondary education company.

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