A New York bankruptcy court has cleared Charlottesville-based WorldStrides to get back in the education travel business in the midst of the same pandemic that put the company into Chapter 11 back in July.
WorldStrides’ parent company, Lakeland Tours, filed for bankruptcy after the coronavirus caused most travel plans to be canceled. The move affected the company’s 23 affiliates that operate the variety of travel businesses offered by Lakeland and WorldStrides.
The bankruptcy agreement allowed the company and its officers to continue to run the organization with restructured debt and a restructured board of directors.
“We’re pleased to complete our reorganization even earlier than originally planned,” WorldStrides President and CEO Robert Gogel said in a news release. “We’re grateful for the continued support of our shareholders, lenders and employees throughout this process. With a strengthened capital structure, this significant milestone will enable WorldStrides to continue offering best-in-class educational travel and experiential learning opportunities.”
According to documents filed in the U.S. Bankruptcy Court for Southern New York, where Lakeland Tours is incorporated, the company was doing well up until the pandemic struck.
“The debtors have historically enjoyed a stable position as a market leader in educational travel, generating approximately $650 million in net revenue in fiscal year 2019,” the company’s chief financial officer, Kellie Goldstein, said in a court filing. “The debtors were projected to deliver over $840 million in net revenue for fiscal year 2020 pre-COVID-19.”
That would not happen, however.
“Like much of the travel industry, however, the debtors’ businesses were decimated by the spread of COVID-19 and the attendant global shutdown on nonessential travel beginning in early March 2020,” Goldstein said in the filing. “Although the debtors have a strong long-term outlook when taking into account pre-COVID-19 historical operating performance and market trends such as increased spending on educational experiences, the debtors’ businesses have suffered from loss of most revenue and a slowdown in future bookings.”
Bankruptcy court records describe WorldStrides as an educational travel and experiences provider with both domestic and international programs. It is the country’s largest accredited travel program.
The company has provided experience-based learning opportunities for more than 550,000 students from grade school to high school to graduate school, the records state. More than 7,000 primary schools and 800 universities have worked with the company.
According to court records, WorldStrides responded to the pandemic ahead of customers, canceling its travel and education abroad programs in February and bringing back an estimated 3,800 students already overseas.
In March, the company canceled all programs through May 15 and later extended the cancelations. That led to 195 employees in the U.S. losing their jobs and 500 employees being furloughed, as well as salary reductions for others. The company also eliminated 401(K) matches to employee retirement accounts through March 2021.
Court records show the company employs about 1,500 people worldwide.
To keep in business for the near future, the company needed about $200 million for the next two years. That need, plus existing debts, led to the Chapter 11 filing, Goldstein said in the filing.
“The need for significant new capital to support the debtors’ businesses, coupled with the burden of the debtors’ existing capital structure and funded debt obligations, necessitated the restructuring transactions contemplated,” she said. “Following months of analysis and negotiations with its key stakeholders, on July 8 the company reached a deal … among holders of approximately 85% of the debtors’ prepetition secured loan claims.”
The reorganization includes $368 million in transactions, including $200 million in new capital with $100 million from lenders and $100 million from the debtors themselves. Also included are $150 million in carryover loans, $2 million in previous letters of credit and $16 million in fees, records show.
The funding and restructuring will allow the company to bring back some of the 500 furloughed employees as the company searches for ways to continue operating within the confines of the pandemic. How many will return and when is not currently known.
“Changes to staffing have been related to the timing of when programs and travel will begin, and not due to the reorganization and recapitalization,” a company spokeswoman said. “The reorganization was a financial exercise, not an operational reorganization. Our successful recapitalization leaves us with a strengthened capital structure and the ability to navigate the constantly changing world of travel.”
One of the first steps for the company will be to refund fees for travel that was canceled.
“We will continue working diligently to navigate the COVID-19 pandemic and provide cash refunds to travelers whose trips and programs were impacted by the pandemic,” Gogel said in his statement. “Our Back to Travel Task Force has made significant progress in establishing guidelines around safely returning to program operations in the new COVID-19 world while partnering with our program leaders on future planning.”
According to court filings, company officials believe their experience will give WorldStrides a leg up on the competition.
“WorldStrides likely will be able to benefit from the high barriers to entry for its potential competitors in the post-COVID-19 recovery period,” Goldstein said in a court document. “As a relationship business that relies on connections with educators and administrators to connect with students, WorldStrides additionally is bolstered by its 50 years of operations and consistent track record of providing high-quality educational services to its student customers.
Goldstein said in the documents that WorldStrides’ “proven record and broad network of connections with educators and administrators provides significant leverage over new entrants.”
According to court documents, WorldStrides was founded in 1967 by a Chicago middle school social studies teacher. In November 2017, the company was bought by Eurazeo Capital, an investment company, and Primavera Capital Group, a China-based investment firm.