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Corinthian Colleges, Inc. (Nasdaq:COCO) has signed an operating agreement with the U.S. Department of Education that establishes an orderly transition plan for its 107 campuses and online programs, and allows its students to complete their educational programs. ED has also provided for an immediate drawdown of Title IV (student financial aid) funds for currently enrolled students and a mechanism for continued funding while the agreement is in place.
The operating agreement is consistent with the Memorandum of Understanding announced by the Department and Corinthian on June 23, 2014. Under the terms of the agreement, Corinthian will put 85 of its U.S. schools up for sale, and “teach out” (gradually wind down) operations at 12 other schools. Corinthian agreed to work toward signing definitive agreements for campus sales in approximately six months. Separately, the Company will also begin a sales process for its Canadian schools.
ED will also appoint an independent compliance and business Monitor who will serve as the primary liaison between Corinthian and ED. Corinthian has agreed to suspend enrollment of new students until July 8, 2014, when ED and Corinthian plan to have the Monitor in place.
“We are pleased to have reached an agreement with ED that helps protect the interests of our students, employees and other stakeholders,” said Jack Massimino, Corinthian Chairman and Chief Executive Officer. “This agreement allows our students to continue their education and helps minimize the personal and financial issues that affect our 12,000 employees and their families. It also provides a blueprint for allowing most of our campuses to continue serving their students and communities under new ownership.”
Under the terms of the operating agreement:
– The Monitor will have full access to Corinthian’s personnel and financial and operational information, and his or her duties will include monitoring of on-going Title IV disbursements, campus sales and teach-outs, company expenditures, and document production related to ED’s requests for information. ED expects to name the Monitor as Corinthian will remain under ED’s Heightened Cash Monitoring 1 (HCM1) oversight, which includes a 21-day hold on federal Title IV financial aid funds. To prevent the disruption of school operations, ED will immediately allow Corinthian to draw funding advances against the 21-day hold, subject to conditions set forth in an amendment to the Memorandum of Understanding originally signed on June 22, 2014. After the Monitor is in place, he or she will review the Company’s on-going Title IV disbursements.
– Corinthian has agreed that it will complete its response to a request by ED for documents related to 175,000 of its graduates by July 15.
– Corinthian will provide written notices to all students regarding its plans for their respective campuses or online programs.
Corinthian expects to provide additional information regarding the operating agreement and the amendment to the Memorandum of Understanding in a Form 8-K filing with the Securities and Exchange Commission on Monday, July 7, 2014.
“I especially want to thank publicly our 12,000 employees who have risen to the occasion during the difficult circumstances of these past few weeks,” Massimino added. “They have worked around the clock to continue serving our students and to help make possible this orderly path forward.”
