November 8, 2012 / 11:02 PM / 5 years ago

UPDATE 1-Career Education to cut jobs, shut campuses

Nov 8 (Reuters) - Career Education Corp will close 23 campuses and cut 900 jobs amid losses and falling student enrollments that also threaten to affect its financial position.

The for-profit education company said its $185 million credit agreement expired on Oct. 31 and it has still not been able to renew it.

Career Education said it cannot predict with certainty whether it will be able to obtain a replacement credit agreement due to the expected decline in its operating performance and a weak economic recovery.

"We currently expect that if we are able to obtain a replacement agreement it will provide less credit availability than our expired credit agreement, and it is likely to contain more restrictive financial and non-financial covenants," the company said in its quarterly report with the U.S. Securities and Exchange Commission.

The company expects to post a loss of $140 million to $160 million for 2012, according to the filing.

Career Education, which runs the American InterContinental University, Le Cordon Bleu North America and the Sanford-Brown colleges among others, has been struggling along with other for-profit colleges to attract students.

Enrollments have been hit due to new federal rules that have forced colleges to focus on a better quality of education and higher loan repayment rates or risk losing federal aid that accounts for big part of the colleges' revenue.

Career Education has also come under pressure after investigations last year found several of its colleges reporting false placement rates to attract students. Its stock has fallen nearly 80 percent since then.

The company on Thursday said the job cuts, which will be completed by January 2013, are expected to save about $45 million to $55 million.

The campuses that are to be shut are expected to contribute about $124.3 million of revenue for the year ending Dec. 31. The campuses will remain open to offer current students the ability to complete their course.

Career Education posted a net loss of $33.1 million, or 50 cents per share, in the third quarter, compared with a profit of $10.6 million, or 10 cents per share, a year earlier.

Revenue fell 22 percent to $332.8 million. New student sign-ups fell 23 percent.

The company's shares closed at $3.41 on Thursday on the Nasdaq.

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