Education Management Lenders Get Control in Debt Swap

Education Management Corp., the for-profit college operator partly owned by Goldman Sachs Group Inc., clinched a deal with creditors that would effectively cede control to them in exchange for reducing debt. The stock tumbled as much as 23 percent.

The company reached an agreement with a majority of its lenders to cut borrowings by 73 percent to $400 million, according to a statement today. In return the lenders would get a preferred equity stake convertible to common shares and warrants for the purchase of additional stock, according to the statement. Existing shareholders would see their stake cut to 4 percent after the conversion of the preferreds, though they will be granted warrants to purchase an additional 5 percent of the common stock.