Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ESI > SEC Filings for ESI > Form 8-K on 2-Jul-2014All Recent SEC Filings

Show all filings for ITT EDUCATIONAL SERVICES INC

Form 8-K for ITT EDUCATIONAL SERVICES INC


2-Jul-2014

Entry into a Material Definitive Agreement, Regulation FD Disclosure


Item 1.01 Entry into a Material Definitive Agreement.

On June 30, 2014, ITT Educational Services, Inc. (the "Company") entered into a Third Amendment to Credit Agreement, Consent and Waiver (the "Third Amendment") with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Third Amendment provides for certain amendments to and waivers of certain covenant defaults under the Credit Agreement dated as of March 21, 2012, as amended by the First Amendment thereto dated as of March 31, 2014 and the Second Amendment thereto dated as of May 29, 2014 (the "Credit Agreement"), among the Company, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and Wells Fargo, N.A., as documentation agent. Capitalized terms used in this Form 8-K and not defined herein have the meanings ascribed to such terms in the Credit Agreement.

The Third Amendment provides that:

The aggregate commitment of the lenders is reduced to $135.0 million, and the portion of the commitments available for letters of credit is increased from $25.0 million to $80.0 million. If the Company has not caused the issuance of a letter of credit to the U.S. Department of Education (a "DOE Letter of Credit") by September 30, 2014, the aggregate commitments of the lenders will be reduced to $100.0 million, and the availability for letters of credit will revert to $25.0 million. Certain letters of credit in an aggregate amount of approximately $2.3 million previously issued by JPMorgan Chase Bank, N.A. are deemed to be letters of credit issued pursuant to the Credit Agreement.

The Company is required to provide cash collateral (in an amount equal to 103% of the face amount of the letter of credit) for any letter of credit issued under the Credit Agreement with a face amount of $10.0 million or more. This requirement will not apply to any DOE Letter of Credit until December 31, 2014. Up to $75.0 million in cash posted as cash collateral for a DOE Letter of Credit will be treated as cash for purposes of determining the Company's compliance with the minimum Liquidity covenant of the Credit Agreement.

The covenants in the Credit Agreement regarding Indebtedness (Section 6.01) and Investments, Loans, Advances and Acquisitions (Section 6.04) are amended to allow the consolidation, for accounting purposes, of the assets and liabilities of the PEAKS Trust beginning February 28, 2013, as described in the Current Report on Form 8-K filed by the Company on June 24, 2014 (the "Consolidation").

The Credit Agreement prohibits Restricted Payments, with enumerated exceptions. The exception to the Restricted Payment covenant that allows certain Restricted Payments, contingent upon pro forma financial covenant compliance (Section 6.06(d)), is replaced with a requirement that such Restricted Payments may not exceed $5.0 million in any fiscal year, plus an additional $5.0 million in any fiscal year from net cash proceeds of a Sale and Leaseback Transaction. Discretionary payments by the Company or any Subsidiary relating to any Private Education Loan Program are Restricted Payments, and therefore during the remaining term of the Credit Agreement (which has a maturity date of March 21, 2015), the Company will be limited in its ability to elect to accelerate the timing of certain guarantee payments under the private education loan program that it entered into in 2009 (the "2009 Loan Program") in order to discharge its guarantee obligations related to certain 2009 Loan Program private education loans that default.

-2-

Section 6.12(a) of the Credit Agreement is amended to provide that the Leverage Ratio may not exceed 3.00:1.00 as of the end of the fiscal quarter ending June 30, 2014, 2.75:1:00 as of the end of the fiscal quarter ending September 30, 2014, and 2.50:1:00 as of the end of the fiscal quarters ending on and after December 31, 2014. Section 6.12(b) of the Credit Agreement is amended to provide that the minimum Fixed Charge Coverage Ratio must be 1:75:1:00 or greater at the end of each fiscal quarter other than the fiscal quarter ended March 31, 2014. For the purpose of calculating EBITDA as it relates to the foregoing covenants, the Company is permitted to add back to its net income up to $86.0 million in charges related to Private Education Loan Programs incurred during the fiscal year ending December 31, 2013.

Section 6.12(d) of the Credit Agreement is amended to provide that the DOE Ratio may not be less than or equal to 1.00:1.00 for the fiscal year ending December 31, 2013, and not less than 1.50:1:00 for any other fiscal year.

Not later than July 18, 2014, or such later date as is acceptable to the administrative agent in its sole discretion, the obligations of the Company under the Credit Agreement and for certain related bank products must be secured by security interests in all assets of the Company and the Subsidiary Guarantors, other than real property, fixtures, and other assets that may be excluded by agreement with the administrative agent.

Sections 5.01(a) and 5.01(c) of the Credit Agreement are amended such that the audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Company, and the certificate of a financial officer of the Company as described in Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal year ending December 31, 2013, required to be furnished by the Company, are required to be furnished by July 31, 2014, instead of June 30, 2014 (the date established by the First Amendment to Credit Agreement);

Sections 5.01(b) and 5.01(c) of the Credit Agreement are amended such that the internally prepared consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Company, and the certificate of a financial officer of the Company as described in
Section 5.01(c) of the Credit Agreement, in each case, as of and for the fiscal quarter ending March 31, 2014, required to be furnished by the Company, are required to be furnished by July 31, 2014, instead of June 30, 2014 (the date established by the First Amendment to Credit Agreement); and

The Third Amendment rescinds the provisions of the First Amendment to Credit Agreement which limited the Company's borrowings and letters of credit to $125.0 million until such time as the Company delivers a certificate pursuant to Section 5.01(c) of the Credit Agreement demonstrating compliance with
Section 6.12 of the Credit Agreement (without giving effect to the First Amendment).

-3-

Under the Third Amendment, the administrative agent and lenders waive the following Defaults or Event of Defaults:

(i) noncompliance with the Leverage Ratio covenant under Section 6.12(a) of the Credit Agreement as of the end of the fiscal quarters ending March 31, 2013, June 30, 2013, and September 30, 2013, and noncompliance with the Fixed Charge Coverage Ratio covenant under Section 6.12(b) of the Credit Agreement as of the end of the fiscal quarters ending March 31, 2013, June 30, 2013, September 30, 2013, and December 31, 2013, and any Event of Default under Article VII(b), (c) and (d) of the Credit Agreement with respect thereto;

(ii) any violation of the covenants in Section 5.01(b), Section 5.06, and
Section 5.07 of the Credit Agreement, and any Event of Default under Article VII (c) and (e) of the Credit Agreement, solely to the extent that such violations or Events of Default relate to or arise from inaccuracies in the financial statements for the fiscal quarters ending March 31, 2013, June 30, 2013, and September 30, 2013 delivered pursuant to Section 5.01(b) of the Credit Agreement that exist as a result of or relate to the Consolidation;

(iii) any violation of the covenants in Section 5.03 and Section 5.07 of the Credit Agreement, and any Event of Default under Article VII (c) and (e) of the Credit Agreement with respect thereto, solely to the extent that such violations or Events of Default relate to or arise from the Company's failure to file audited financial statements for the fiscal year ending December 31, 2013 with the DOE on or before June 30, 2014;

(iv) any violation of the covenant in Section 5.01(c) of the Credit Agreement and any Event of Default under Article VII(c) and (d) of the Credit Agreement with respect thereto, solely to the extent it results from or is related to the matters described in clauses (i), (ii), or (iii) above; and

(v) any violation of Section 5.02(b) of the Credit Agreement and any Event of Default under Article VII(c) and (d) of the Credit Agreement with respect thereto, solely to the extent it results from or is related to the matters described in clauses (i) through (iv) above.

The above summary of the Third Amendment is qualified in its entirety by the full text of the Third Amendment, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference. The Credit Agreement was filed by the Company as Exhibit 10.1 to its Current Report on Form 8-K filed on March 27, 2012, the First Amendment was filed by the Company as Exhibit 10.1 to its . . .



Item 7.01. Regulation FD Disclosure.

On July 1, 2014, the Company received letters from the DOE indicating that the Company's institutions have not submitted the required Compliance Audit and the Company's audited 2013 financial statements by June 30, 2014. The letters from the DOE describe the potential determinations and actions that the DOE could make or take as a result of the failure to submit these audits by the due date, which are also described under Item 1.01 above, but the letters do not state that the DOE has made any such determinations or taken any such actions at this time. The information disclosed under Item 1.01 above is incorporated into this Item 7.01 by reference.



Item 9.01. Financial Statements and Exhibits.

(d) Exhibits:

The following exhibit is being filed herewith:

Exhibit No. Description

10.1 Third Amendment to Credit Agreement, Consent and Waiver, dated as of June 30, 2014, by and among ITT Educational Services, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent

-7-

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this Current Report on Form 8-K are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are made based on the current expectations and beliefs of the company's management concerning future developments and their potential effect on the company. The company cannot assure you that future developments affecting the company will be those anticipated by its management. These forward-looking statements involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: the inability of the company to file its 2013 Form 10-K during any available New York Stock Exchange ("NYSE") cure period; the NYSE's failure to grant a further extension of time in which the company can file the 2013 Form 10-K; any actions by the DOE related to the company's failure to submit its 2013 audited financial statements with the DOE by the due date; the impact of the Consolidation on the company and the regulations, requirements and obligations that it is subject to; the failure of the company to obtain further required amendments or waivers of noncompliance with covenants under its credit agreement; changes in federal and state governmental laws and regulations with respect to education and accreditation standards, or the interpretation or enforcement of those laws and regulations, including, but not limited to, the level of government funding for, and the company's eligibility to participate in, student financial aid programs utilized by the company's students; business conditions and growth in the postsecondary education industry and in the general economy; the company's failure to comply with the extensive education laws and regulations and accreditation standards that it is subject to; effects of any change in ownership of the company resulting in a change in control of the company, including, but not limited to, the consequences of such changes on the accreditation and federal and state regulation of its campuses; the company's ability to implement its growth strategies; the company's failure to maintain or renew required federal or state authorizations or accreditations of its campuses or programs of study; receptivity of students and employers to the company's existing program offerings and new curricula; the company's ability to collect internally funded financing from its students; the company's exposure under its guarantees related to private student loan programs; the company's ability to successfully defend litigation and other claims brought against it; and other risks and uncertainties detailed from time to time in the company's filings with the U.S. Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

-8-

  Add ESI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ESI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.