The reality of the matter ,KKR traded the bond position for equity, they don't want to own a money losing at risk educational system . For KKR to cash out and minimize their share holders loss, they need to keep EDMC and the 4 Brands up and running, try to get them on track to turn a profit and sell them off. That is the reality of the situation. They will not permit the voluntary filing of bankruptcy as that would kill what ever federal funds remain after gainful employment kicks in. Hell 2 months ago KKR bought a vertical chicken producer / processor for the Chinese market for about the same they have tied into the EDMC debacle . I'd bet on the Chinese chicken deal...
13 replies (most recent on top)
Get your resume updated and start filling out apps. This isn't sarcasm it's being realistic. If you have mouths to feed this is a situation you shouldn't be involved in.
Get your resume updated and start filling out apps. This isn't sarcasm it's being realistic. If you have mouths to feed this is a situation you shouldn't be involved in.
Yeah I took this job knowing it wasn't a career choice but just a paycheck. I had fun. Check didn't bounce (yet). Now it's time to hit the road.
111466 Since you have a family to provide for, the best I can offer is to move on rather than waiting to see how it turns out. I left a looming time ago...I like to be in control of my outcomes...it is a pain in the ass to job search, but I was looking for work when I found EDMC...I knew it was nota career move at the time...
The key is KKR will only keep the schools running until they suck their profit out that they put in. Once this is done they have not interests in keep the school or brads alive. Why should they, its not their job. That is how these financial firms work, it is not some evil plot to take down EDMC, it basic business and free market capitalism. This is how Mitt Romney made his billions by the way, same method, different companies. They go in with platitudes about how they are going to Save The Company but its more like buying a used car from a collector in trouble, siphoning off the gas and selling the rest for scram metal.
The key issues facing EDMC, aside from Gainful Employment which will have more of an impact down the road if no changes are made, are the federal lawsuit/12 state attorney general inquiries and Art Institute ed system profitability. Even with the capital restructuring, EDMC cannot afford (literally) for any of the lawsuits or inquiries to go further than they are now. Litigation will put EDMC in a financial situation that it cannot sustain. The second issue is making sure that the Art Institutes continue to be profitable. They account for over 50% of EDMC's revenue. As they go, so goes the company. Private loan lenders are pulling out and the government is wanting to count VA benefits in 90/10 calculations. The Marblegate decision and $11 billion judgement will not be the death of EDMC. There are a number of other things that can, and very well will, take them down.
So, what is everyone's projection for when this impacts employees again? When are the brands forced to cut themselves in half again and at what kind of pace are we talking? When will the company shut its doors for good, how long does it have left? No sarcastic comments on this one please. I can understand why some would want to answer "tomorrow hopefully", but some of us have families to provide for and are trying to get realistic expectations as to when we will all need to move on.
@Anonymous111406, KKR is a business and Kravis is a billionaire businessman. Therefore, the answer to your question is "no." KKR would drop EDMC like a hot potato if it gets too expensive.
- That is a good question. I think it would depend on how close they thought they were to resolution of possible settlements, brand spin off / sale . The highest value would be for up and running schools, but once in for $400 plus mill. How much more and for how long are you willing to bleed.
I think the key word to note is voluntary. At any time the government can withhold federal funds while they explore something they find fishy--which could be any number of things in EDMC. At that point will KKR fund EDMC enough to keep them afloat?
Kravis can handle any financial loss, but I'm sure KKR will be asking for more labor cutting costs.
They will negotiate a payout to marble gate. Everyone loses if they shut EDMC done at this time . The students, employees, lenders, KKR and other owners.. Matters will be negotiated to settlement . Obviously, There are not enough assets to pay an $ 11 billion judgement , on the single suit not to mention the out of house legal expense. Watch how it plays out, it's like a train wreck in slow motion.
I know its been said that going bankrupt is not an option because that would mean no federal loans but what I'm not understanding is how they are going to avoid it with this judge ruling that they have to pay that 14 million to those bond holders along with the gainful employment regulations. We know they are not making a profit so how are they going to avoid filing for bankruptcy?