Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Test Preparation Company Seeks Bankruptcy Protection
Author: Joel R. Glucksman
Date: January 29, 2013
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Education Holdings filing for Chapter 11 Bankruptcy Protection
High school and college students, who are preparing for the SAT and GRE tests in the hope of getting into a good school, now have – at least temporarily – one fewer option when choosing a test preparation company, as one popular service provider has filed for bankruptcy protection.
Education Holdings 1 Inc., formerly known as the Princeton Review, filed for Chapter 11 bankruptcy protection under bankruptcy law in a Delaware courtroom. The filing is a “pre-pack,” meaning that at least some of the creditors have already at least informally agreed to the debtor’s proposed plan of reorganization. The filing comes one month after the test-prep service settled fraud allegations with the United States. The company listed both assets and liabilities of between $100 million and $500 million. The company said it has specific plans to reorganize and expects to borrow between $4 million and $7 million to assist its efforts while it goes through the bankruptcy process.
Education Holdings’ prepackaged reorganization plan must be voted on by its senior secured claim holders, who are owed at least $36.3 million, second-lien facility claimants due $7 million, and other note holders owed more than $110 million, according to Bloomberg. If these entities formally agree with the terms of the reorganization plan, it will then be subject to court approval. Bain Capital Venture Fund LP was listed as the company’s biggest equity security holder, with a 9.7 percent stake. Falcon Investment Advisors LLC and Sankaty Advisors LLC are the biggest unsecured creditors, with each owed $56.3 million, Bloomberg notes.
The company agreed to a $10 million fraud settlement with the U.S. Department of Justice in December. The federal agency filed a lawsuit against Education Holdings in May, alleging that it accepted tens of millions of dollars in federal funds to provide tutoring and educational services to New York City school children that it failed to deliver.
A separate company, TPR Education LLC, is now operating as the Princeton Review, and is not part of these bankruptcy proceedings.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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