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Last week, 2U announced that it has submitted a voluntary “prepackaged” Chapter 11 filing. To provide more context around what these changes mean for the company and its university partners, Paul Lalljie, CEO of 2U, agreed to answer some key questions.
Disclosure: I am a member of 2U’s University Partner Advisory Council.
Q: With recent discussions and reports focusing on 2U’s debt and long-term stability as a university partner, today’s announcement is quite significant. What led you to choose this path?
A: Today’s decision was the right move for our company.
Since I took over as CEO, we’ve been up front that our balance sheet issues were significant and that we were working with our debt holders on a solution in light of upcoming debt maturities in January 2025.
After exploring many options over the past several months, we identified a clear path to manage these challenges and strengthen our balance sheet. The transaction we announced today is the best way to reduce and restructure our debt while securing new capital for future investments.
Importantly, this transaction reduces our total debt by over 50 percent and extends the maturity date of our remaining debt. This transaction also infuses approximately $110 million into the business, showcasing our debt holders’ confidence in 2U as an industry leader. This investment, along with the significant reduction of our debt, positions us for growth, innovation and, most importantly, success for our partners and learners both in the near term and long term.
To implement this transaction swiftly and with continuity for our students and partners, we have filed voluntary “prepackaged” Chapter 11 cases. This means we have already agreed on the terms with our debt holders and are implementing the transaction through the bankruptcy court. The greatest benefits of a prepackaged filing are the speed to completion and the assurance that all parties are comfortable with the terms of the transaction in advance of the filing. We expect to complete the transaction by the end of September, if not sooner.
2U’s business fundamentals remain strong. We want to reassure our partners and stakeholders that 2U is here to stay. We will emerge from this transaction with a significantly strengthened financial position, ready to advance our mission and remain a steadfast partner to universities worldwide.
Q: What does this mean for university partners? What does it mean for students?
A: This transaction transforms our balance sheet and has no impact on our operations. All programs and services will continue seamlessly with no impact to students or partners. We understand that continuity is paramount, and we are dedicated to maintaining it.
Looking ahead, this will have a positive impact on partners and learners. A healthier balance sheet enables us to invest in technology, services, marketing and career-relevant programs—everything needed to continue to improve the learning experience for all. Although we will be a private company under new ownership following the close of this transaction, our mission remains unchanged and our long-term strategy is intact.
This transaction represents the decisive, difficult, yet responsible action that we need to move forward. We recognize that there may be noise in the media regarding this announcement, but what matters most to us is that our partners understand the benefits of this strategic move. We are actively engaging with our partners about the transaction and committing to clear and transparent communication to make sure they are informed and confident in our future.
Q: What should we expect from 2U going forward?
A: Demand for online education is growing, and 2U’s role is critical, especially in this technology moment.
Online learning has massive growth potential due to emerging fields like AI and the need to develop and reskill the modern workforce. Online learning is also flexible, allowing students to learn wherever they are and expanding opportunities to diverse communities. We are well positioned and intend to meet these evolving workforce needs and reach learners across the world in partnership with great universities and companies.
With reduced debt and additional capital, 2U will be an even stronger company, allowing us to invest more in our teams and programs. By addressing our financial challenges head-on, we can now focus on what truly matters: expanding access to more learners, providing world-class services to partners and, most importantly, delivering strong student outcomes. We are optimistic about the future.
