Dive Brief:
- For-profit college operator Education Management Corp. lost a battle with one of its hedge fund bondholders and now will have to continue making payments on $14 million in bonds.
- The Wall Street Journal reports a federal judge ruled in favor of Marblegate, finding Education Management Corp. must guarantee "past and future payments of principal and interest."
- Had the company filed for bankruptcy, Marblegate wouldn’t have had a case, but The Wall Street Journal reports Education Management stuck with out-of-court restructuring to continue its flow of federal student loan funding.
Dive Insight:
According to The Wall Street Journal, all but one of Education Management Corp.’s unsecured bondholders agreed to the restructuring plan it proposed last year. They were owed $217 million and instead of getting payments, they got an equity stake in the restructured company. Marblegate argued Education Management couldn’t proceed without its consent. While the judge’s decision likely won’t have much of a ripple effect as the WSJ reports most companies get around bondholders like Marblegate by declaring bankruptcy, it will restrict Education Management’s future. The for-profit college company operates art institutes across the country as well as Argosy University, Brown Mackie College and South University.
