June 23 (Bloomberg) -- Corinthian Colleges Inc., owner of Everest and Heald for-profit colleges, said the U.S. government will allow the company to access $16 million in student-aid funds as it seeks buyers for most of its 107 campuses.
Corinthian, based in Santa Ana, California, said last week it might have to cease as a going concern after the government limited access to federal funds. The agreement with the Department of Education will allow Corinthian’s 72,000 students to continue their schooling during the transition period, Corinthian said today in a statement.
“While it provides temporary relief, we think it will be short-lived and view this as Step 1 of the ultimate unwind of the institution,” Michael Tarkan, an analyst at Compass Point Research & Trading LLC in Washington, said by e-mail. Last week, Tarkan cut his price estimate on Corinthian shares to zero from 50 cents.
Corinthian is under investigation by several states attorneys general, the Justice Department and the Consumer Financial Protection Bureau for its marketing and recruiting practices. The Education Department has said it took action after the company failed to address concerns about falsifying job placement data used in marketing and allegations of altered grades and attendance.
U.S. Senator Richard Durbin last week called on Corinthian to stop enrolling students to prevent people “from being loaded with debt if the company fails because of fraudulent disclosures to the federal government.”
Kent Jenkins, a spokesman for Corinthian, declined to comment on the government’s action when reached last week.
Corinthian will stop enrolling new students at schools that are underperforming or whose Title IV student-aid funding has been terminated, the company said today.
Corinthian said it will still need additional sources of liquidity to fund operations.
The shares rose 21 percent to 41 cents at 10:38 a.m. in New York.
To contact the reporter on this story: Chris Staiti in Boston at firstname.lastname@example.org
To contact the editors responsible for this story: Lisa Wolfson at email@example.com Bruce Rule, Chris Staiti