Corinthian Colleges May Be Unable To Continue As A Going Concern

(RTTNews) - Corinthian Colleges Inc. (COCO), which is under investigation on allegations of grades and job placement data, Thursday said in a regulatory filing that it may be unable to continue as a going concern, after access to cash was limited by the government.

''If the Company is unable to timely obtain alternate financing, the Company's cash flows will not be sufficient to meet its obligations as they become due, which would cause the Company to be unable to continue as a going concern,'' Corinthian said.

COCO fell 67 percent to close at $0.28, but added 21.4 percent in the extended trade.

The company received a letter from the U.S. Department of Education or ED in January, which requested for extensive information about placement results and attendance and grade changes for certain prior periods. Additional letters were received in April and May, which expanded the scope of the information requests.

Corinthian said that since its receipt of the first letter, the company has expended substantial resources in making rolling production of responsive documents and data to ED.

The firm expects to devote even more extensive resources to do so as it cooperates with ED in its ongoing review. On June 12, another letter was received in which ED noted outstanding documentation and data that the company had yet to provide, and asked questions regarding the data and documents so far provided.

The June letter also added additional information requests and sought action with respect to many of the requested items.

In subsequent communications with ED, the company committed to redouble its efforts to provide the requested information and has provided a timetable for it. ED also informed the company that it has transferred all company schools from Advance Payment to Heightened Cash Monitoring 1 or HCM1, effective immediately, as a result of the extended time the company has taken to provide requested documents and data.

Under the HCM1 payment method, the company must, contemporaneous with making disbursements to eligible students and parents, provide ED with certain documentation of the students' eligibility for Title IV program funds in support of its request for payment from ED in the amount of those disbursements.

In the ordinary course such funds are available for drawdown by the company within 24 to 72 hours of the request. However, ED has imposed an additional stipulation delaying drawdown of the requested funds for a period of 21 days.

ED's transfer of the company's schools from the Advance Payment method to HCM1 status, plus the imposition of the 21-day waiting period before drawing down funds, will adversely affect the timing of the company's operating cash flows and is expected to result in a significant shortfall in cash flows.

The company is seeking relief from ED for the 21-day waiting period required by the June Letter, but has been unsuccessful to date in its efforts to obtain such relief.

If such relief is not provided, the company's existing cash balances will be insufficient to sustain it through this transition period.

The company has engaged in discussions with its credit facility lenders to obtain financing to bridge the shortfall in operating cash flows during this transition period, but the lenders have indicated they would not provide any such financing.