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Carmel-based ITT Educational Services Inc. plans to cease all operations on Friday after a decision by its senior lender to seize control of its bank accounts.
The for-profit educator, which last week shut down all 136 of its ITT Technical Institute campuses in 38 states, announced the decision in a regulatory document Wednesday.
ITT announced the campus closures Sept. 6, a week after the education department banned the company from accepting new students who use federal financial aid. ITT received 79 percent of its cash receipts from the federal student loan program in 2015.
The education department also placed several other sanctions on ITT, including a freeze on executive compensation and an order that it increase its surety funds from $94.4 million to $247.3 million within the next 30 days.
ITT said it received notification from the lender, New York-based Cerberus Business Finance LLC, on Sept. 8 that said the company was in default on its financing agreement due to the U.S. Department of Education’s Aug. 25 requirement that ITT increase its surety by $152.9 million.
The lender said ITT was required to immediately repay the entire outstanding amount of its loan of “approximately $34.5 million, together with all fees, costs and expenses and all other obligations payable under the financing agreement.”
The lender also said it "provided notice to the company’s financial institutions that the lender was exercising its control over the company’s bank accounts and instructed the financial institutions to transfer all of the company’s cash balances to accounts controlled by the lender."
That apparently was the final straw for ITT.
“The cumulative effects of the events over the last several weeks have led the company to plan to cease all operations as of September 16, 2016,” ITT said in Wednesday’s Securities & Exchange document.
The company had already eliminated the vast majority of its 8,000 employees when it closed down the ITT campuses.
ITT spokeswoman Nicole Elam could not be reached for comment Wednesday. An automatic return email to IBJ from Elam said, “As of Sept. 14, 2016, I am no longer with ITT Educational Services Inc.”
ITT was founded in 1946 as Educational Services Inc. and has been headquartered in Carmel since 1969. It filed its initial public offering in 1994.
Total student enrollment was 43,293 as of March 31.
Daniel Webster rescue
In a press release Wednesday, ITT said it had a reached “teach-out” agreement with Southern New Hampshire University to let 550 Daniel Webster College students continue their education at SNHU.
Daniel Webster is college in Nashua, New Hampshire, that was owned by ITT Educational. More than a third of the Daniel Webster students are enrolled in aviation or mechanical engineering programs.
Seniors who complete their program by August can receive a Daniel Webster College degree. Students who start the academic year with fewer than 90 credit hours will continue as SNHU students and receive a SNHU degree if they decide to remain in the program.
About 90 faculty and staff at Daniel Webster will receive payroll and benefits from SNHU.
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