PITTSBURGH, Jan. 5, 2015 /PRNewswire/ -- Education
Management Corporation (EDMC), one of the largest providers of
post-secondary education in North
America, today announced that it has completed the first of
two steps in the Restructuring Support Agreement it entered into
with debt holders on Sept. 4,
2014.
In connection with the comprehensive debt restructuring
transaction, including the completion of its private offer to
exchange all outstanding Senior Cash Pay/PIK Notes due 2018 and
Senior PIK Toggle Notes due 2018, the company cancelled in excess
of $1.3 billion of outstanding
indebtedness in exchange for the issuance of two first lien senior
secured term loans due July 2, 2020
in the aggregate principal amount of $400
million, mandatorily convertible preferred stock, optionally
convertible preferred stock and warrants for common stock.
The company also repaid $150 million
under its existing line of credit and obtained a new line of credit
in the amount of $150 million which
is presently undrawn.
"We are very pleased to have completed the first stage of our
restructuring so quickly, which demonstrates our creditors' belief
in EDMC's long-term value," said Edward H.
West, Education Management president and CEO. "This new
capital structure will allow us to transform the company and
continue to provide students a quality education."
Prior to completing the restructuring, the company reached
agreement with certain creditors that had contested the
transactions, including Magnolia Road Capital LP. As
previously announced, the United States District Court for the
Southern District of New York
denied the motion filed by Marblegate Asset Management, LLC and
Magnolia seeking to preliminarily enjoin the company from
completing its debt restructuring. Marblegate did not
participate in EDMC's restructuring and EDMC intends to continue
litigation with Marblegate to protect the interests of the
overwhelming majority of its creditors who did
participate. Marblegate held approximately $14 million of the company's more than
$1.5 billion of indebtedness
outstanding prior to the restructuring.
The company expects to complete the second, and final, stage of
the restructuring by mid-2015 upon the receipt of additional
regulatory approvals and a vote by the company's shareholders. Upon
receipt of these approvals, a portion of the newly issued preferred
stock will be mandatorily converted into common shares, and the
remainder will become convertible at the election of the
holder. Upon conversion in their entirety, the preferred
shares will represent approximately 96 percent of the company's
outstanding common stock without giving effect to warrants issued,
and a management incentive plan to be implemented, in connection
with the restructuring.
EDMC was advised by Evercore Group L.L.C., Wachtell, Lipton,
Rosen & Katz, and McKinsey & Company. The company's ad hoc
group of term lenders was advised by Houlihan Lokey Capital, Inc.
and Milbank, Tweed, Hadley & McCloy LLP. Its ad hoc group of
revolving lenders was advised by FTI Consulting, Inc. and White
& Case LLP. An ad hoc group of senior noteholders was advised
by Houlihan Lokey Capital, Inc. and Paul, Weiss, Rifkind, Wharton
& Garrison LLP.
About Education Management Corporation
Education
Management Corporation (www.edmc.edu) is among the largest
providers of post-secondary education in North America, based on student enrollment and
revenue, with a total of 110 locations in 32 U.S. states and
Canada. The company offers academic programs to students
through campus-based and online instruction, or through a
combination of both. The company is committed to offering
quality academic programs and strives to improve the learning
experience for its students. Its educational institutions
offer students the opportunity to earn undergraduate and graduate
degrees and certain specialized non-degree diplomas in a broad
range of disciplines, including media arts, health sciences,
design, psychology and behavioral sciences, culinary, business,
fashion, legal, education and information technology.
Cautionary Statement
This press release includes
information that could constitute forward-looking statements with
the meaning of the Private Securities Litigation Reform Act of
1995. These statements typically contain words such as
"anticipates," "believes," "estimates," "expects," "intends" or
similar words indicating that future outcomes are not known with
certainty and are subject to risk factors that could cause these
outcomes to differ significantly from those projected.
Forward-looking statements include, but are not limited to,
statements about the timing of completion of Step 2 of the
restructuring; benefits to the company from the restructuring; and
the implementation of a management incentive plan in connection
with the restructuring. Any such forward-looking statements
involve risk and uncertainties that could cause actual results to
differ materially from any future results encompassed within the
forward-looking statements. Some of the factors that could
cause actual results to differ materially include, but are not
limited to: risks associated with the ability to consummate step 2
of the restructuring; the ability to realize the anticipated
benefits of the proposed restructuring; changes in the overall U.S.
or global economy; changes in enrollment or student mix; student
retention; the Company's ability to maintain eligibility to
participate in Title IV programs; changes in government spending;
increased or unanticipated legal and regulatory costs; success of
cost-cutting initiatives and growth strategies; changes in
accreditation standards; the implementation of new operating
procedures for the company's fully online programs; government and
regulatory changes including revised interpretations of regulatory
requirements that affect the postsecondary education industry; new
programs and operational changes implemented in response to the new
"gainful employment" regulation issued by the U.S. Department of
Education which will become effective as of July 1, 2015; and other factors discussed in the
company's filings with the Securities and Exchange Commission,
including those identified in the "Risk Factors" section of the
company's Annual Report on Form 10-K and Quarterly Reports on Form
10-Q. Past results of the company are not necessarily
indicative of its future results. The company does not
undertake any obligation to update any forward-looking statements,
except as required by securities laws.
Investor Contact:
John Iannone
Director of
Investor Relations
(412)
995-7727
Media
Contact:
Chris
Hardman
VP of
Communications
(412) 995-7187
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SOURCE Education Management Corporation