September 20, 2016
Curtis Advised B&H Education in Connection with its Assignment for the Benefit of Creditors
Curtis advised B&H Education, Inc. (d/b/a Marinello Schools of Beauty) (“B&H”) in connection with the closing of its for-profit, postsecondary schools and facilities and the winding-up of its business. The company executed a general assignment for the benefit of creditors under California law in favor of Development Specialists, Inc., a leading provider of management consulting and financial advisory services to companies in need of operational improvements, balance sheet restructuring or turnaround management.
B&H took this action after the U.S. Department of Education notified the company on February 1, 2016 that it was denying re-certification of Title IV student financial assistance programs for 23 of the company’s 54 locations, subject to appeal, effective as of Monday, February 29, 2016. This triggered certain rights of setoff to the Company’s cash for its senior secured lenders, which, combined with several prior months of denied access to student aid funds by the Department of Education, left B&H with insufficient liquidity to continue operations without an additional capital infusion. As a result, the company made the decision to close its schools and terminate employees.
The assignment in favor of Development Specialists, Inc. became effective on Friday, February 26, 2016. This was just three days before the original effective date of the U.S. Department of Education’s denial of re-certification of Title IV funding, and less than a month after the initial notification to the company. According to the terms of the assignment, Development Specialists, Inc. became responsible for liquidating the Company’s assets and distributing the proceeds to the Company’s creditors. This assignment was designed, under the circumstances, to maximize the chance of greater recoveries for the B&H’s creditors, relative to alternative strategic options such as Chapter 7 liquidation.
Prior to the assignment for the benefit of creditors, B&H operated a chain of for-profit, postsecondary schools training students to become cosmetologists, barbers, estheticians, manicurists, and other professionals skilled in the art of skin, nails, and hair care. The company was in its 110th year of operation before it closed. At the time of closure, operations encompassed 54 locations in five states, including California, Nevada, Utah, Kansas, and Connecticut.
The Curtis team included Partner Steven J. Reisman and Counsel Cindi M. Giglio from the Restructuring and Insolvency Department.