Cerberus motions for $6m bankruptcy loan to ITT Tech

The New York-based financial firm steps in to finance the education company’s liquidation.

An Indianapolis federal bankruptcy judge will consider on Wednesday whether Cerberus Capital Management can provide ITT Educational Services with a $6 million bankruptcy financing loan.  

The money would be used to fund ITT’s wind-down, in part by compensating the professionals working on the case. The loan has a proposed maturity date of 17 July 2017 and carries a 9 percent interest rate, or 11 percent in the event of default.

The hearing on the loan marks the latest step in a Chapter 7 bankruptcy process that began last month. The US Department of Education had decided to bar ITT from accepting new students using federal aid money, prompting the Indiana-based company to close all of its campuses. The debtor’s total liabilities as of 30 June were $419.8 million, according to its second-quarter earnings report filed with the SEC.

Cerberus provided a $100 million loan to the company in December 2014, of which ITT still has an outstanding balance of $20.7 million, the court filing also shows.

The New York-based financial firm has been a frequent creditor in large bankruptcy proceedings. In June, Cerberus provided a $22 million loan to a bankrupt Gawker Media, while last year the firm was a lender on RadioShack’s $250 million term loan when that company was restructuring.