The federal government will allow one of the nation’s largest for-profit college companies to be sold only if the new owners put up $385 million as insurance and agree not to increase enrollment, among other terms.
Apollo Education Group, the parent company of the University of Phoenix, agreed in February to be bought by a consortium of investors for $1.1 billion. The deal would take the publicly traded company private and aim to turn around its struggling finances. In its most recent fiscal year, it reported an operating loss of $65 million while enrollment at the University of Phoenix fell 23 percent.
The U.S. Department of Education, whose approval is needed to obtain federal funding, announced on Wednesday that it will give its blessing only if Apollo’s proposed buyers agree to several requirements laid out in a 10-page letter.
Among key terms, the new owners would have to pay $385 million that would cover costs if the company fails. The amount represents 25 percent of Phoenix-based Apollo’s federal funding last year.
The proposed buyers, led by the private equity firm Apollo Global Management, also would be barred from increasing enrollment at Apollo schools and would have to submit regular reports on enrollment and revenue.
The Department of Education, in its letter, said the conditions are meant to “ameliorate operational and administrative capability risk.” Apollo officials said they received the letter and are evaluating it.
The University of Phoenix, which has campuses nationwide, says it offers campus and online degree programs, certificate courses and individual online classes, putting “college in your reach with flexible classes designed to fit your needs.”
