By Rohit T. K. and Mridhula Raghavan
(Reuters) - It took a cryptic message on her college login page to alert Stephenie Wickiser to the plight of the company that owns her online university.
Corinthian Colleges Inc is the first university operator in the United States to feel the force of a government crackdown on the $28 billion for-profit education sector.
As part of an agreement with the Department of Education - the same deal to which Wickiser's login page made reference - Corinthian has six months to sell most of its campuses or close them down. Analysts say it will be difficult to find a buyer.
"I am just worried that I am going to be stuck with all these student loans, and my degree means absolutely nothing," said Wickiser, a paralegal student at Corinthian's Everest University Online.
Many of the 70,000-plus students enrolled at Corinthian's colleges and universities might be wondering the same thing.
The Santa Ana, California-based company is subject to multiple federal and state probes into such matters as whether it misled investors and students about its finances and job placement rates.
Like many of its peers, the company has struggled to attract students since a prolonged series of investigations by the Department of Education revealed high student debts, low graduation numbers and poor employment rates among graduates.
Enrollment has declined for six straight quarters. Corinthian, a company worth nearly half a billion dollars at the start of 2011, has a market capitalization of $20 million today.
Its shares trade at 14.6 times forward 12-month earnings, one of the lowest multiples among peers that include Strayer Education Inc, DeVry Education Group Inc and Universal Technical Institute Inc, StarMine data shows.
The key to selling its assets may lie in whether the Department of Education uses its discretionary powers to waive liabilities for potential buyers around the legal and regulatory issues that hang over the company.
EVEREST'S UPHILL STRUGGLE
Sixty-nine of Corinthian's 94 Everest campuses are on the block as part of the July 3 agreement, as well as four of its five WyoTech campuses and all 12 colleges operating under the Heald brand.
Corinthian, which receives about $1.4 billion annually in federal aid, declined to comment on whether it was in talks with potential buyers.
"We will revisit the agreement with the department at the 3-month mark and the 6-month mark, and see where we are at those points," said Kent Jenkins, a spokesman for the company, referring to dates in September and December.
Analysts said Everest, which includes the online university at which Wickiser is enrolled, would be the toughest sell.
"I think it is not going to find buyers for the Everest brand," said Michael Tarkan, analyst at investment firm Compass Point Research & Trading LLC.
He said he believed 43 percent of Everest programs would fail the Department of Education's gainful employment standards.
These guidelines, expected to be finalized in October, will measure the performance of for-profit colleges against criteria including student debt-to-earnings.
Kevin Kinser, associate professor at the University at Albany, State University of New York and an expert on for-profit higher education, said programs offered at about a third of Corinthian's campuses had very poor performance metrics.
Everest campuses, which offer vocational courses in subjects such as healthcare, IT and criminal justice, also have national accreditation - perceived by many to be less prestigious than regional accreditation.
"Its national accreditation makes it an unlikely asset for strategic buyers, with the potential exception of similar private operators," said Trace Urdan, analyst at Wells Fargo Securities.
If a buyer can be found, he said, the Everest campuses could sell for up to $100 million.
Corinthian's problems are mounting. The company lost $79.6 million from January to March, causing a breach of bank debt covenants. Its cash stake has shrunk and new student enrollments fell 13 percent in the quarter ended March 31.
The appointment last week of Patrick Fitzgerald, a former federal prosecutor, to oversee the sales process at Corinthian reflects the high level of scrutiny around the company.
As independent monitor, Fitzgerald will have full access to Corinthian's personnel and budget records, make sure the company complies with federal laws and help to ensure that already-enrolled students complete their study courses.
For Wickiser, a single mother scheduled to graduate next year, the wait goes on. She says repeated phone calls to her university have so far resulted only in long periods on hold.
David Bergeron, a former acting assistant secretary for post-secondary education at the Department of Education, said the possibility of bankruptcy existed should Corinthian be unable to sell some or all of its colleges.
"That would cause them to lose eligibility for federal aid and shut down," he said.
He and Kinser, however, said the regulator could step in to avoid disruption to students. Colleges that cannot be sold were likely to be wound down gradually, they said.
"That would be the orderly process," said Kinser. "Disorderly would be students and staff showing up one morning to padlocked doors."
(Additional reporting and writing by Sweta Singh; Editing by Robin Paxton)