August 27, 2014 / 1:40 PM / in 3 years

Education Management restructuring to lower debt by $1.1 bln

Aug 27 (Reuters) - Education Management Corp said it would undertake a financial restructuring that would reduce its debt by about $1.1 billion and would seek a waiver of all financial covenants through June under an amendment to its credit facility.

The for-profit education company’s shares rose 10 percent to $1.69 in early trading.

The company said it will exchange about $1.5 billion of outstanding debt as of June 30 for $400 million of new debt, preferred equity convertible into common shares and warrants.

Education Management said its existing shareholders will retain 4 percent of the outstanding stock after the conversion of the preferred shares and will receive warrants to buy an additional 5 percent.

The company, among the largest providers of post-secondary education in North America, is the latest U.S. for-profit education provider to restructure its debt.

These companies have been rocked by falling enrollments and increased regulatory scrutiny resulting from their poor record of creating employable graduates.

Education Management said 80 percent of its debt holders support the restructuring so far.

Up to Tuesday’s close, the stock had lost over 80 percent of its value so far this year. (Reporting by Sweta Singh in Bangalore; Editing by Savio D‘Souza)

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