It's a Maturity Issue, Not a Liquidity Issue

Further thoughts after the 2U response

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A few weeks ago I agreed to publish Andrew Hermalyn’s response about our recent coverage on the financial crisis at 2U. Reflecting on that post led me to some further research, which has helped my understanding of 2U’s situation and potential path(s) forward. For our new subscribers, the background articles of relevance:

With that in mind, the key updates I have are to clarify that 2U’s problems are around debt maturity and not liquidity, and that I believe there is a real turnaround attempt in progress.

Cash Available

When I asked Hermalyn about the drop in cash from $182.6 million to $73 million year-over-year and whether partner institutions should be concerned, he replied:

Partners should not be concerned. The decline in cash you’re referencing was due to paying down a portion of our term loan in January 2023, which is reflected in our year-over-year cash position.

He is correct that 2U had paid down some of the term loan in question, which affected the cash on hand metrics. I would argue that there is a long-term cash trend that goes beyond paying debt and is a potential cause for concern, but point taken.

According to a document 2U emailed its partners that attended a webinar on February 20th on this subject and coverage, it stated that:

2U has sufficient time and liquidity (cash) to operate our business, make strategic investments in growth areas, and deliver our contractual obligations to you.

This “liquidity” is their key point - in terms of operating and even paying loan payments (and interest), 2U appears to have sufficient cash for normal business operations.


What the company has confirmed, directly and indirectly, is that it must refinance its term loan that matures in 2025, and if does not succeed, the company would have to declare bankruptcy. That is my key point across these posts - not that 2U will cease to operate, but rather that one way or the other 2U has to deal with that debt outside of normal operations.

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