Situation
Mosaica Education, Inc. operated charter schools in multiple states and overseas with more than 8,500 students actively enrolled in 24 local schools. After several years of supporting unprofitable schools and investing in international ventures Mosaica found itself unable to meet its debt service obligations to its principal secured creditor and was seriously delinquent in paying withholding tax obligations to federal, state and local governments. The IRS alone was owed over $1.0 million. In addition to problems at the Mosaica level, many of the independent charter schools had significant liquidity and debt problems, compounding the severity of the situation.
Action
GGG was appointed as Federal Receiver of Mosaica by the United States District Court for the Northern District of Georgia in October 2014. GGG immediately began developing a budget and business plan for Mosaica which was used to manage cash and would eventually be used to support a sale of the business. Due to the financial problems of the schools, GGG was in on going communication with many of the school boards and their independent authorizing bodies. GGG also assisted several schools with the renewal of their charters, supported marketing efforts to improve enrollments, and collected past due receivables that had been outstanding for many years. In order to improve the financial position of the schools, GGG negotiated a court approved settlement with several of the schools that reduced the debt they had accumulated over a number of years, while simultaneously making a significant cash payment to Mosaica that provided ample liquidity to operate the business until a sale could be completed. GGG explored various refinancing alternatives and asset sale alternatives, however ultimately determined that the business needed to be sold.
Results
GGG enabled the secured creditor to liquidate its collateral in a series of transactions. The school management agreements were sold to several buyers in August 2015, and the bulk of the real estate was sold in September and October 2015. GGG operate the schools through a complete school year with no interruption to student education. One of the schools, Columbus Preparatory Academy ranked as the #1 elementary school in the State of Ohio (of 1682 schools) during GGG’s management tenure.