Halifax-based technology school ITI voluntarily agreed to the appointment of a receiver Thursday after financing negotiations failed with the Nova Scotia government and its biggest shareholder.
Torstar Corp. announced late Thursday that its third quarter results will include a write-off of the publishing giant’s remaining investment in ITI Education Corp. The write-off is estimated to be $25 million, or 33 cents per share, after tax.
ITI agreed to appoint receiver Ernst & Young Inc. effective immediately, after the educator couldn’t arrange a financing guarantee with investors.
“Torstar’s provision of financing facilitates an opportunity to discuss potential arrangements with various Provincial and State authorities in an effort to best protect the interest of students,” said Mathew Harris, senior vice-president of E&Y and court- appointed receiver, in prepared statement.
Julie Kaufman, research manager skills research at IDC Canada, said it was clear something like this was going to happen.
“The rumours in the industry have been rampant over the eight months that ITI was in financial difficulties,” she said from her Toronto office. She said that the rumours came from end users, competitors, corporations and students.
“With a loss of almost $12 million this year and $11 million last year and no real strategy in terms of fixing that problem,” she said, “they have gone through an expansion over the last 18 to 24 months that has certainly increased revenue, but it hasn’t been able to control its costs.”
Kaufman said she wasn’t sure why Torstar got involved in ITI when it restricted itself to the K-12 education market, but said it could have been a move in response to the demand for qualified IT workers. The next move, Kaufman continued, will have the biggest impact on ITI’s students.
“With any situation like this, they have to find a place for their students,” she said. “Most of the students will have to switch to different schools and in many cases, especially with the ITI model, their choice is very limited. A purchase would be best for the students involved, but with the financial difficulties they have had, it will be very difficult to find someone to buy the lot.”
Thursday’s press release indicated that financing would continue the company’s operations for an interim period, while a search for a purchaser of the business is undertaken. Discussions are currently underway with a number of potential purchasers.
Just a few weeks ago, the company closed its U.S. schools and announced a net loss of $18.4 million in its second quarter.
According to Torstar’s release, the school had been in discussions for months with potential investors and the government of Nova Scotia about new financing arrangements.
“During this time, Torstar provided an additional $3 million in financial support,” the company said in its release. “Regrettably these discussions proved to be unsuccessful.”
ITI operates seven schools in Canada and had three in the United States. It teaches business and technical skills to university graduates.