Education Management Corporation Completes Initial Phase of Debt Restructuring

PITTSBURGH, Jan. 5, 2015 /PRNewswire/ -- Education Management Corporation (EDMC), one of the largest providers of post-secondary education in North America, today announced that it has completed the first of two steps in the Restructuring Support Agreement it entered into with debt holders on Sept. 4, 2014.

In connection with the comprehensive debt restructuring transaction, including the completion of its private offer to exchange all outstanding Senior Cash Pay/PIK Notes due 2018 and Senior PIK Toggle Notes due 2018, the company cancelled in excess of $1.3 billion of outstanding indebtedness in exchange for the issuance of two first lien senior secured term loans due July 2, 2020 in the aggregate principal amount of $400 million, mandatorily convertible preferred stock, optionally convertible preferred stock and warrants for common stock.  The company also repaid $150 million under its existing line of credit and obtained a new line of credit in the amount of $150 million which is presently undrawn.

"We are very pleased to have completed the first stage of our restructuring so quickly, which demonstrates our creditors' belief in EDMC's long-term value," said Edward H. West, Education Management president and CEO. "This new capital structure will allow us to transform the company and continue to provide students a quality education."

Prior to completing the restructuring, the company reached agreement with certain creditors that had contested the transactions, including Magnolia Road Capital LP.  As previously announced, the United States District Court for the Southern District of New York denied the motion filed by Marblegate Asset Management, LLC and Magnolia seeking to preliminarily enjoin the company from completing its debt restructuring.  Marblegate did not participate in EDMC's restructuring and EDMC intends to continue litigation with Marblegate to protect the interests of the overwhelming majority of its creditors who did participate.   Marblegate held approximately $14 million of the company's more than $1.5 billion of indebtedness outstanding prior to the restructuring.

The company expects to complete the second, and final, stage of the restructuring by mid-2015 upon the receipt of additional regulatory approvals and a vote by the company's shareholders. Upon receipt of these approvals, a portion of the newly issued preferred stock will be mandatorily converted into common shares, and the remainder will become convertible at the election of the holder.  Upon conversion in their entirety, the preferred shares will represent approximately 96 percent of the company's outstanding common stock without giving effect to warrants issued, and a management incentive plan to be implemented, in connection with the restructuring.

EDMC was advised by Evercore Group L.L.C., Wachtell, Lipton, Rosen & Katz, and McKinsey & Company. The company's ad hoc group of term lenders was advised by Houlihan Lokey Capital, Inc. and Milbank, Tweed, Hadley & McCloy LLP. Its ad hoc group of revolving lenders was advised by FTI Consulting, Inc. and White & Case LLP. An ad hoc group of senior noteholders was advised by Houlihan Lokey Capital, Inc. and Paul, Weiss, Rifkind, Wharton & Garrison LLP.

About Education Management Corporation
Education Management Corporation (www.edmc.edu) is among the largest providers of post-secondary education in North America, based on student enrollment and revenue, with a total of 110 locations in 32 U.S. states and Canada.  The company offers academic programs to students through campus-based and online instruction, or through a combination of both.  The company is committed to offering quality academic programs and strives to improve the learning experience for its students.  Its educational institutions offer students the opportunity to earn undergraduate and graduate degrees and certain specialized non-degree diplomas in a broad range of disciplines, including media arts, health sciences, design, psychology and behavioral sciences, culinary, business, fashion, legal, education and information technology.

Cautionary Statement
This press release includes information that could constitute forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995.  These statements typically contain words such as "anticipates," "believes," "estimates," "expects," "intends" or similar words indicating that future outcomes are not known with certainty and are subject to risk factors that could cause these outcomes to differ significantly from those projected.  Forward-looking statements include, but are not limited to, statements about the timing of completion of Step 2 of the restructuring; benefits to the company from the restructuring; and the implementation of a management incentive plan in connection with the restructuring.  Any such forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements.  Some of the factors that could cause actual results to differ materially include, but are not limited to: risks associated with the ability to consummate step 2 of the restructuring; the ability to realize the anticipated benefits of the proposed restructuring; changes in the overall U.S. or global economy; changes in enrollment or student mix; student retention; the Company's ability to maintain eligibility to participate in Title IV programs; changes in government spending; increased or unanticipated legal and regulatory costs; success of cost-cutting initiatives and growth strategies; changes in accreditation standards; the implementation of new operating procedures for the company's fully online programs; government and regulatory changes including revised interpretations of regulatory requirements that affect the postsecondary education industry; new programs and operational changes implemented in response to the new "gainful employment" regulation issued by the U.S. Department of Education which will become effective as of July 1, 2015; and other factors discussed in the company's filings with the Securities and Exchange Commission, including those identified in the "Risk Factors" section of the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.  Past results of the company are not necessarily indicative of its future results.  The company does not undertake any obligation to update any forward-looking statements, except as required by securities laws.

Investor Contact:
John Iannone
Director of Investor Relations
(412) 995-7727
Media Contact:
Chris Hardman
VP of Communications
(412) 995-7187

SOURCE Education Management Corporation

Related Links

http://www.edmc.edu