Dive Brief:
- Bank of America and other lenders have a prominent place at the negotiating table when struggling for-profits are at the edge of survival.
- Inside Higher Ed reports that during Corinthian College’s downfall, Bank of America and a group of others lent emergency funds — but only on the condition that the for-profit college chain hired an approved chief restructuring officer and gave them the last word on any agreements with the U.S. Department of Education.
- When Anthem Education went down the same path, Bank of Montreal led the emergency lending and required the same type of hire, a person the bank would have direct access to and who, ultimately, negotiated the sale of campuses that helped the bank recoup much of its losses.
Dive Insight:
Inside Higher Ed reports that some nonprofit colleges have also negotiated with their lenders over management decisions following cash infusions, but those agreements “appear far less sweeping.” In the case of higher education clients, lenders have less incentive to push so hard that the schools go into bankruptcy because that means their business is over. Colleges in bankruptcy cannot receive federal financial aid and, in the case of some for-profits, that makes up 90% of their revenue. Other companies are able to do the paperwork of bankruptcy while continuing to operate and pull in more cash that ultimately benefits lenders.