The US Department of Education slapped a set of tough conditions on a US$1.1 billion private equity bid for the company that owns the University of Phoenix, the nation’s largest for-profit university, after years of trying to rein in the for-profit college industry, reports Bloomberg News.
The university’s owner, Apollo Education Group, won preliminary government approval for a group of Wall Street investors including Apollo Global Management (no relation) to buy it. But the conditions of the approval, which the prospective owners must meet for the university to continue receiving federal student aid, are so exacting that they have a legal right to walk away from the agreement, deal documents show. For example, they must stump up a US$385.6 million letter of credit and, in a serious obstacle to profitability, are barred from expanding the university’s enrolment.
Proprietary universities have been the object of widespread complaints by consumer advocacy organisations and state attorneys general that they engage in misleading marketing practices to enrol students, only to saddle them with taxpayer-backed debt they’re unable to repay. Trace Urdan, an analyst at Credit Suisse Group, sees the tough conditions placed on the deal as a sort of ‘parting shot’ by the outgoing administration.
Full report on The Denver Post site
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