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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

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FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: December 31, 2015

(Date of Earliest Event Reported)

LINCOLN EDUCATIONAL SERVICES CORPORATION

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(Exact Name of Registrant as Specified in Charter)

200 Executive Drive, Suite 340, West Orange, New Jersey  07052

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(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (973) 736-9340

Not applicable

 

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 1.01.

Entry into a Material Definitive Agreement.

On December 31, 2015, Lincoln Educational Services Corporation (the “Company”) and its wholly-owned subsidiaries (collectively, the “Borrowers”) entered into an amendment (the “Amendment”) of the Credit Agreement dated as of July 31, 2015 (the “Credit Agreement”) among the Borrowers, its lenders Alostar Bank of Commerce, HPF Holdco, LLC and Rushing Creek 4, LLC, and HPF Service, LLC, in its capacity as administrative agent and collateral agent (the “Agent”).

The Amendment allows a temporary reduction of the Borrowers’ minimum cash requirements to accommodate the payment of a $5 million lease termination fee paid by the Company on December 31, 2015 to its landlord in connection with the early termination of a lease agreement under which the Company’s wholly-owned subsidiary NN Acquisition, LLC leased property in Hartford, Connecticut used as a culinary arts school by the Borrowers for a term continuing through July 31, 2031 (the “Lease Termination Transaction”).  The terminated lease agreement was replaced with a short-term lease agreement in order to allow students currently enrolled at the school to complete their course of study.

The Amendment reduces the $27 million of Unrestricted Cash (as defined in the Credit Agreement) required to be maintained by the Borrowers as of the fiscal quarter ended December 31, 2015 by an amount equal to the lesser of (i) $5 million and (ii) the aggregate amount of verified out of pocket costs (including lease termination fees) incurred by the Borrowers on or prior to December 31, 2015 in connection with the Lease Termination Transaction.  The Amendment reduces the amount of Unrestricted Cash required to be maintained as of December 31, 2015 only and does not reduce the amount of Unrestricted Cash required to be maintained as of any other fiscal quarter end.

The Amendment requires the Borrowers to deliver to the Agent on or before February 25, 2016 a certificate from the chief financial officer of the Company, which indicates, and contains a detailed calculation of, the Company’s composite score as of December 31, 2015 under the factors of financial responsibility set forth in 34 C.F.R. Part 668, Subpart L.  If the certificate indicates that the Company’s composite score is less than 1.5, the Borrowers must make a prepayment of $5 million of the principal amount of the term loans outstanding under the Credit Agreement on or prior to February 26, 2016.  The prepayment must be accompanied by the applicable prepayment premium and accrued interest.  If the certificate reflects a composite score of 1.5 or more and, for any reason, the Company’s composite score as of December 31, 2015 is later determined to be less than 1.5, the Borrowers must, within three business days of such determination, make a prepayment of $5 million of the principal amount of the term loans outstanding under the Credit Agreement, together with the applicable prepayment premium and accrued interest.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment filed as Exhibit 10.1 to this Current Report on Form 8-K, which is incorporated herein by reference.

Item 2.03.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure contained in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits:

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

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Exhibit 10.1

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of December 31, 2015, is by and among LINCOLN EDUCATIONAL SERVICES CORPORATION, a New Jersey corporation (“Parent”), and its Subsidiaries party hereto (Parent and such Subsidiaries, each, individually, a “Borrower”, and collectively, “Borrowers”), the lenders identified on the signature pages hereof as Tranche A Lenders, and HPF SERVICE, LLC, as administrative agent for the Lenders party to the below described Credit Agreement (in such capacity, together with its successors and assigns in such capacity, “Administrative Agent”) and as collateral agent for the Tranche A Lenders party to the below described Credit Agreement (in such capacity, together with its successors and assigns in such capacity, “Tranche A Collateral Agent”).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement dated as of July 31, 2015 (the “Existing Credit Agreement”) by and among Borrowers, the Tranche A Lenders and Tranche B Lenders party thereto, Administrative Agent, Tranche A Collateral Agent, and ALOSTAR BANK OF COMMERCE, as collateral agent for the Tranche B Lenders (in such capacity, together with its successors and assigns in such capacity, the “Tranche B Collateral Agent”), the Tranche A Lenders and the Tranche B Lenders made certain loans to Borrowers; and

WHEREAS, Borrowers desire to close their School that is listed on the School and Real Property Information Certificate as “Hartford LTI” (the “Hartford LTI School”), which Hartford LTI School is a Designated School; and

WHEREAS, in connection with the closure of the Hartford LTI School, Borrowers anticipate paying an early termination fee to the landlord with respect to the Hartford LTI School campus (the “Lease Termination Fee”); and

WHEREAS, in connection with the closure of the Hartford LTI School, NN Acquisition, LLC (“NNA”) and Lincoln Technical Institute, Inc. intend to enter into a Lease Termination Agreement, Assignment of Subleases/Lease and Conveyance of Membership Interests and Personalty dated on or about the date hereof, with CCI/85 Sigourney LLC (“Sigourney”) (the “Lease Termination and Assignment Agreement; together with all documents executed in connection therewith, the “Lease Termination and Assignment Documents”), pursuant to which, among other things, (i) NNA will transfer certain of its personal property assets as more particularly described in the Lease Termination and Assignment Documents (collectively, the “NNA Personal Property”) to Sigourney (such transfer, the “NNA Personal Property Transfer”), and (ii) NNA will transfer all membership interests issued by Sigourney and owned by NNA (collectively, the “Sigourney Equity”) to Sigourney (the “Equity Transfer”).

WHEREAS, in connection with the foregoing, Borrowers have requested that (i) Administrative Agent consent to the reduction of the minimum Unrestricted Cash required to be maintained by Borrowers, under Section 7.1 of the Existing Credit Agreement, as of December 31, 2015 in an amount not to exceed the lesser of $5,000,000 and the amount of verified out of pocket costs incurred by Borrowers with respect to the closure of the Hartford LTI School, and (ii) Administrative Agent and Required Lenders consent to the Equity Transfer; and

 

WHEREAS, Administrative Agent and the Tranche A Lenders party hereto are willing to provide such consent, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the agreements herein contained and other good and valuable consideration, the parties hereby agree as follows:

PART  I.

DEFINITIONS

“Amended Credit Agreement” means the Existing Credit Agreement as amended hereby.

“First Amendment Effective Date” shall have the meaning set forth in Subpart 3.1.

PART  II.

CONSENT AND PARTIAL RELEASE OF LIEN

PART  III.

AMENDMENTS TO EXISTING CREDIT AGREEMENT

 

PART  IV.

CONDITIONS TO EFFECTIVENESS OF PARTS II AND III

 

PART  V.

MISCELLANEOUS

 

[The remainder of this page is intentionally left blank.]

 

Each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.

 

 

 

 

 

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