UPDATE 1-Corinthian gets $16 mln funding from U.S. Dept of Education
(Adds details, background)
June 23 (Reuters) - Corinthian Colleges Inc said it would receive $16 million in federal aid from the U.S. Department of Education that would prevent the for-profit education provider from a cash shortfall.
The agreement with the Department of Education will allow Corinthian to keep running its schools, while the college operator seeks buyers for most of its campuses in the next six months.
Corinthian's shares were trading 26 percent higher at 42 cents on Monday afternoon.
Corinthian, which operates 107 campuses and runs online courses, said it would finalize a more detailed transition plan with the Department.
The company said it would be allowed to determine which schools it would sell, and how many it would wind down.
Corinthian has been exploring strategic options and seeking alternative sources of capital since it breached some debt covenants earlier this year.
Santa Ana, California-based Corinthian said last week its ability to continue to be in business was in jeopardy after the U.S. Department of Education extended the waiting period to draw down federal student aid funds.
The warning sent Corinthian's stock down more than 60 percent.
Increased regulation has added to the woes of for-profit education companies such as Apollo Education Group and Strayer Education Inc, which have struggled to attract students since a 2010 government crackdown revealed high student debt loads, low graduation rates and poor employability of graduates. (Reporting by Mridhula Raghavan in Bangalore; Editing by Ted Kerr and Saumyadeb Chakrabarty)