By Angela McDaniels
Tacoma, Wash., March 4 - Education Management Corp. said its indirect subsidiaries Education Management LLC and Education Management Finance Corp. received tenders for $361,293,000 principal amount, or 96%, of their 8¾% senior notes due 2014.
The subsidiaries began a private exchange offer for the notes on Feb. 4. It ended at midnight ET on March 1.
Holders were offered new senior cash pay/pay-in-kind notes due 2018 plus cash.
The subsidiaries will issue $200,821,063 principal amount of new notes and pay $168,723,478.34 of cash in exchange for the old notes tendered in the offer. The total cash payment will be funded with a portion of the company's cash on hand.
The cash amount includes cash in lieu of any fractional amount of new notes not received as a result of rounding and accrued interest on the old notes up to but excluding the settlement date, which is expected to be March 5.
Holders who tendered their notes by the early tender deadline, 5 p.m. ET on Feb. 14, will receive $1,000 per $1,000 principal amount, which includes an early tender payment of $30 per $1,000 of notes. The payment will be made in the form of $555.84 principal amount of new notes and $444.16 of cash.
Holders who tendered after the early tender deadline but before the expiration date will receive $970 per $1,000 principal amount, including $555.84 principal amount of new notes and $414.16 of cash.
The split between notes and cash was determined based on the amount of notes tendered.
The total cash payment is equal to $175 million minus the principal amount of notes not tendered by the early tender deadline. As of the early deadline, holders had tendered $359,813,000 principal amount of notes.
The total cash payment per $1,000 principal amount tendered by the early tender date is the product of (a) $1,000 multiplied by (b) the quotient of (i) the total cash payment divided by (ii) the total principal amount of notes accepted for exchange.
If 100% of the notes had been tendered by the early tender date, the split would have been $533.33 of new notes and $466.67 of cash.
New notes, other details
Cash interest on the new notes will accrue at 15% per year. From March 30, 2014 through July 1, 2018, interest in addition to the cash interest payable will be paid by increasing the principal amount of the outstanding new notes or by issuing additional new notes.
PIK interest on the new notes will accrue at a rate of
• 1% from March 30, 2014 through March 30, 2015;
• 2% from March 30, 2015 through March 30, 2016;
• 3% from March 30, 2016 through March 30, 2017; and
• 4% from March 30, 2017 through July 1, 2018.
The new notes will be issued by the issuers and guaranteed by the parent company and all of the company's existing direct and indirect domestic restricted subsidiaries, other than any subsidiary that directly owns or operates a school or has been formed for such purpose and has no material assets.
The issuers entered into exchange agreements with institutional investors in which the holders agreed to tender about $330.7 million principal amount, or 88.2%, of notes in the offer, according to a previous company press release.
The exchange offer was conditioned on the receipt of tenders for at least $318.75 million of notes.
Global Bondholder Services Corp. (866 488-1500 or collect 212 430-3774) is the information agent.
Education Management is a Pittsburgh-based provider of private post-secondary education.
| Issuers: | Education Management LLC and Education Management Finance Corp.
|
| Guarantor: | Education Management Corp.
|
| Issue: | Senior cash pay/pay-in-kind notes
|
| Amount: | $200,821,063
|
| Maturity: | July 1, 2018
|
| Coupon: | 15% in cash plus additional amount in kind; PIK interest rate is zero in year one, 1% in year two, 2% in year three, 3% in year four and 5% in year five
|
| Settlement date: | March 5
|
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