OLC Under Bankruptcy Protection

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The Online Learning Consortium (OLC) was created as the Sloan Consortium in the 1990s as “the nation’s largest association of institutions and organizations for online education,” funded by the Alfred P. Sloan Foundation and administered by Babson College and Franklin W. Olin College. A lot of the major online institutions in the US that you read about today were formed in the 1990s and participated in the Sloan Consortium. The Sloan Foundation ended its support in 2008, and the group was renamed as OLC in 2014. This is a good history to read for context.

OLC is currently best known for its two annual conferences - Innovate in April and the larger Accelerate in October or November in Orlando, Florida. The Fall 2024 OLC Accelerate conference removed its virtual attendance option that was introduced during the pandemic. I was not surprised that there was some pushback from the elimination of a virtual option, but the following announcement sent last week seemed like it had a hidden message.

Bankruptcy Filings

I checked the US Court System website through Pacer, and it turns out that OLC entered bankruptcy on December 20th. To me, this is significant news, even though OLC will continue to operate while it uses court protection to fix its finances. Such a historically influential higher education organization facing financial challenges.

The specific type of bankruptcy used is Chapter 11 Subchapter V, which is an option introduced during the pandemic for smaller organizations to use a streamlined process.

All About Conference Minimums

Understanding that OLC is getting protection while continuing operations, the big question is why. Is OLC in a massive debt situation or facing a dramatic decrease in revenue? It turns out the answer is no in both cases.

• OLC’s debt is negligible and only through credit cards.

• OLC’s revenue has been steady (plus or minus 6% over the past six years with 2023 as the peak year).

From my reading of the financials as of December 20th, there are two issues that could have driven the bankruptcy.

• Cash is tight, with $412k cash equivalents but with $490k liabilities (taking out unearned revenue). OLC does have $187k accounts receivable, but trust me, it’s not ideal to count of money due to cover expenses. The point is, cash is tight but does not appear to be a driver, especially as OLC is a nonprofit that does not seek to maximize cash.

• Bigger yet, there are two disputed claims from the Gaylord. $274k from the Gaylord National, site of OLC Accelerate 2023 near DC, and $76k from the Gaylord Rockies near Denver, site of OLC Innovate 2024. The dispute is over these charges that are related to penalties on missing conference minimums.

This is a bankruptcy driven by conference minimums and penalties and not by debt or running out of cash.

The Gaylord

Marriott owns both chains that OLC has used as event and hotel centers - the Swan & Dolphin in Disney World and the Gaylord in multiple locations. The disputes and need for bankruptcy appear centered on the Gaylord.

And that should probably not be surprising, as the Gaylord has been known to take a hard line on pre-Covid contracts. In one case, the Gaylord was sued for $1.8 million for not being willing to renegotiate despite the obvious impact of Covid. In another case, the Gaylord refused to renegotiate a contract for a June 2021 conference and provide a $1.3 million bill for penalties (that was subsequently overturned). Two things in reality have happened since 2020 - conference costs have risen significantly mostly due to inflation, and fewer people attend on-site conferences. The net effect is that it can be very difficult for pre-Covid contracts to meet conference minimums on the number of hotel rooms booked and the total spend on food and beverages. The Gaylord seems to be making it difficult to change contracts unless forced to do so, and bankruptcy is a forcing function.

Interview

In an interview with CEO Jennifer Mathes, she confirmed the Gaylord contracts and disputes as the drivers for OLC entering bankruptcy. In her description, for the long-term health of OLC, they have to make changes, particularly around spending reasonable amounts on conferences given the new realities of post-Covid travel and post-Covid costs. According to Mathes, the bankruptcy driver is really the long-term future hotel conference contracts that were signed well before the pandemic and before she was in her current position. It's not as much about the past, except that OLC has spent hundreds of thousands of dollars on penalties that could have been spent on things for its community (research, scholarships, etc.), and OLC want to make sure that it is able to support the community for the long-term.

In my view, then, the bankruptcy is all about negotiating with the Gaylord to force a revision to these contracts that were signed years ago. What is not known is to what extent the Gaylord will cooperate with OLC (and the courts) during the bankruptcy.

Mathes indicated that the Subchapter V process is moving quickly and that ideally OLC will be out of bankruptcy as soon as this summer. This year’s OLC Accelerate conference will be held at the Marriott-owned Swan & Dolphin hotels at Disney World.

Stay tuned.

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