KGIC, formerly Loyalist Group, has said that unless it secures further investment by December 31, it may not be able to continue operating beyond the end of the year. However, the group’s CEO has assured The PIE News that it is optimistic it will secure further investment or a sale and has no plans to close any schools.
The company reported losses of CAN$19.5m earlier this year and has been in negotiations with its senior lender and several current and potential investors since November 19.
“The company’s cash position has now depleted to a level which will not likely allow the company to operate beyond December 31 without additional financing”
It is currently in a period of forbearance, or delayed foreclosure, which it aims to exit by December 31, but it must obtain further outside investment by that date in order to repay part of its loan.
However, it said in a statement that these negotiations “ultimately did not result in a proposal acceptable to all parties” and that it has so far failed to secure the necessary investment.
“The company’s cash position has now depleted to a level which will not likely allow the company to operate beyond December 31, 2015, without additional financing,” it added.
“There can be no assurance that the company will be able to successfully obtain financing or that any sale of assets or other strategic alternative transactions can be successfully consummated.”
Its stock dropped to a new 52-week low of $0.005 on December 14, after a potential investor pulled out of negotiations.
Shares are down 87.5% over the last five days, and 98.9% for the last year to date.
Nevertheless, Klerer told The PIE News he is optimistic the company will secure further investment.
KGIC still has the backing of its senior lender, the Bank of Montreal, and plans to engage Richter LLP as its financial advisor as it seeks immediate investment.
“The bank recognises all the hard work we have done and realises KGIC has a good business that simply needs a little more time to right the ship,” Klerer said.
“We’ve come a long way and have a bit more to do,” he continued. “As such, the bank has indicated its willingness to invest further in the company while we search for another investor or complete a sale of the company.”
“There is far too much at stake for all parties and as such, we will find a solution.”
Klerer stressed emphatically that the career colleges, language schools and high schools in its stable of 11 school brands are “definitely not closing”.
“All staff have been informed of the situation and they will continue to commit to providing above and beyond service to our students,” he added.
“The bank has indicated its willingness to invest further in the company while we search for another investor or complete a sale”
Meanwhile, KGIC continues to follow its Optimization Plan that has so far seen the company make $14m of a targeted $15m in savings and sell off its two agency divisions.
Speaking with The PIE News, Gonzalo Peralta, executive director of Languages Canada, which accredits four of KGIC’s language schools, echoed that closures are unlikely “given the assets involved”.
Peralta confirmed that in the event of a closure, the association will be ready to step in to ensure that students are not left stranded.
“Of course Languages Canada is monitoring the situation to ensure students are protected and well looked after, and, as is our practice, we are supporting our members through this process,” he said.
Nevertheless, he added: “We are hopeful that the restructuring will result in a more stable institution that will continue to receive international students for many years.”