Education Holdings 1 Inc. the test-preparation company formerly known as Princeton Review, won bankruptcy court approval to borrow as much as $4 million while it reorganizes.
“I will approve and authorize the relief requested,” U.S. Bankruptcy Judge Brendan Shannon said at a hearing today in Wilmington, Delaware.
The interim financing may be increased to $5.6 million at the lenders’ discretion. Education Holdings is to return to court Feb. 7 to seek approval of the rest of the $7 million loan arranged by GE Capital Corp. as administrative agent.
Education Holdings filed for bankruptcy protection Jan. 21, a month after settling a fraud lawsuit with the U.S. government. The company listed liabilities of $100 million to $500 million, and assets of $100 million to $500 million in Chapter 11 court filings. The company filed a so-called prepackaged plan of reorganization that it said has been approved by some creditors.
It had 100 percent approval of its proposed bankruptcy plan from holders of senior secured claims, second-lien facility claims and senior and junior note claims as of Jan. 17, the Framingham, Massachusetts-based company said in its filing. A March 7 hearing is scheduled for court approval of the plan.
The U.S. Justice Department on Dec. 20 announced the settlement of a suit filed against the company in May in Manhattan federal court.
The U.S. claimed Princeton Review received tens of millions of dollars in federal funds for tutoring services to New York City school children that it didn’t provide. The settlement amount is as much as $10 million, the government said.
Falcon Investment Advisors LLC and Sankaty Advisors LLC are the biggest unsecured creditors, according to the filing, which says each is owed $56.3 million. Liabilities to the Justice Department are “undetermined,” according to the filing.
The case is In Re Education Holdings 1 Inc., 13-10101, U.S. Bankruptcy Court, District of Delaware.