Lawmakers Drop Change to Finance Law That Would Help EDMC

December 2, 2015

Congressional negotiators appear to have abandoned plans to attach to a large transportation bill moving through Congress this week a provision that would have helped Education Management Corporation in a dispute with one of its bondholders over the for-profit college’s debt restructuring.

The provision, according to reports by Politico and The Huffington Post, would have scaled back the ability of any company’s bondholders to sue the company for making changes to its debt agreements. It would have applied retroactively to existing lawsuits, including a pending case in which a hedge fund that lent money to EDMC sued to stop the company’s out-of-court debt restructuring.

A judge ruled this summer that EDMC violated the hedge fund’s right to be repaid by the company under a 1939 law meant to protect bondholders. (The judge ruled that the out-of-court debt restructuring could continue, in part because of concerns that EDMC's bankruptcy would disrupt students' education. But she ordered EDMC to continue paying the hedge fund. EDMC has appealed the case to a federal appeals court.)

The provision drew the ire of critics of for-profit colleges, including David Halprin, attorney and advocate, who wrote that it amounted to special treatment for EDMC. 

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