ITT Educational Services has sought Chapter 7 protection in Indianapolis, listing liabilities of between $100 million and $500 million, likely including a debt of at least $34.7 million to Cerberus Capital Management.
The Carmel, Indiana-based defunct for-profit college operator shut all its campuses earlier this month. It initiated a bankruptcy proceeding where it will windup its operations after the US Department of Education barred ITT from accepting new students using federal aid money. The debtor’s total liabilities as of 30 of June were $419.8 million, according to its second-quarter earnings report filed with the SEC.
The former education provider planned to pay off the loan, entered into in December 2014, by the end of the year, according to the earnings report. ITT would have made a $15.5 million payment on 30 September and a $19.2 million payment on 31 December. The loan is priced at a floating rate, but its effective interest rate as of 30 June stood at 14.5 percent.
Neither Cerberus attorney Whitney Mosby of Bingham Greenbaum Doll nor ITT counsel Jay Jaffe of Faegre Baker Daniels could be reached for comment. A Cerberus spokesman declined to comment.
In August, Kevin Genda stepped down as head of Cerberus Business Finance, the Cerberus mid-market lending division that extended the term loan to ITT. Genda had been with Cerberus since 1995, three years after the firm was founded.
Cerberus is no stranger to bankruptcy proceedings, as it regularly provides financing to get companies through Chapter 11 reorganisations and is frequently a creditor in large bankruptcy proceedings. In June, Cerberus provided a $22 million loan to a bankrupt Gawker Media. Last year, the firm became entangled in the RadioShack in-court restructuring, as Cerberus was a lender on RadioShack’s $250 million term loan.