Corinthian to fund $30 million student refund escrow with lender OK

By Kali Hays

New York, Sept. 19- Corinthian Colleges, Inc. entered into a second amended operating agreement with the Department of Education effective as of Sept. 18, establishing an escrow for student refunds, according to an 8-K filed Friday with the Securities and Exchange Commission.

As previously reported, Corinthian signed the operating agreement July 3 that established a framework for the sale and transition of its 107 campuses and online programs while allowing students to complete educational programs.

Under the amended operating agreement, the company has established and begun funding a reserve escrow for the exclusive use of issuing student refunds.

Corinthian agreed to make an initial payment of $500,000 into the escrow, with bi-weekly deposits of $250,000 thereafter until the fund reaches $30 million.

If after the sale of substantially all of the schools there are excess funds in the escrow, the funds will be released to the company, according to the 8-K.

However, under the company’s credit agreement the modification of the operating agreement constitutes an event of default.

The lenders have agreed to forbear from exercising any rights under the credit agreement until Sept. 25, but the Department of Education said it will suspend Corinthian’s future Title IV funding if the lenders do not supply written consent of the amendment by Sept. 25.

The Department of Education also reserves the right to withdraw from the amended agreement if the lenders do not consent.

Corinthian said it is still in need of additional liquidity to fund its operations and to carry out the amended operating agreement and intends to continue to seek the funding through new financings.

Corinthian Colleges is a Santa Ana, Calif.-based post-secondary education company.

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