IBJNews

UPDATE: ITT's stock tumbles after report of loan losses

Back to TopCommentsE-mailPrintBookmark and Share

ITT Educational Services Inc. stock plunged more than 31 percent Thursday morning after the company announced that it spent an extra $43.7 million in the first quarter to cover mounting losses on private student-loan programs it launched during the recession.

And the losses could get much worse.

The Carmel-based operator of for-profit colleges estimated it could pay nearly $228 million more by 2020 to cover losses on the private loan programs.

Shares fell to as low as $17.75 each Thursday morning before bouncing back a bit later in the day. The stock closed at $20.50, down 20.5 percent on the day.

In January, ITT Educational reported that it had set aside a total of $127 million to cover losses on the loan programs. They were started in 2009 and 2010 by credit unions, including the Eli Lilly Federal Credit Union, which suffered a loss in 2012 because of the program.

The programs lent more than $420 million to help students cover the cost of an ITT education that exceeded the amounts allowed by federal student loans.

Student default rates have reached 64 percent in the program, creating a big headache for ITT executives on several fronts.

The U.S. Consumer Financial Protection Bureau focused on the student loan programs in a February lawsuit it filed against ITT, accusing the company of predatory lending practices. ITT has sharply criticized the claims in the lawsuit and asked a federal judge to dismiss it.

Also, ITT Educational has so far kept the loan programs off its balance sheet, but it is now talking with the U.S. Securities & Exchange Commission to determine if it needs to reverse that decision.

That unresolved issue has delayed an audit of ITT's 2013 financial results and caused the company not to report complete first-quarter earnings information Thursday morning, as it was scheduled to do.

Instead, ITT announced some of its operating results from the first quarter.

After three straight quarters of rising enrollment of new students, ITT Educational saw new-student enrollment drop in the first quarter. It was down 3.8 percent compared with the same quarter of 2013, to 16,746.

Overall, ITT enrollment fell 6.4 percent from the end of the first quarter last year, to 57,125.

More positively, ITT’s employable graduates landed jobs at slightly higher rates. As of April 30, 70 percent scored jobs versus 66 percent on April 30, 2013.

Also, those graduates were earning higher pay. The average annual salary of employable graduates was $33,393 as of April 30, up from $32,612 a year before.

ITT shares closed at $25.80 each Wednesday, down 44 percent from a 2014 high of $45.80 in January.

ADVERTISEMENT

  • ITT and Others Need to Have Skin in the Game
    It is good to see that an educational organization has some skin in the game. For too long, organizations like ITT have lived off student loan revenue without accepting any of the risk. Perhaps more organizations, particularly for-profit ones, will be a better steward of finances for uninformed students rather than predators that promise rainbows and deliver debt.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

  5. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

ADVERTISEMENT