💥New Chapter 11 Bankruptcy Filing - Corvias Campus Living - USG, LLC💥
University housing manager files in the District of Delaware
On June 25, 2025, Rhode Island-based Corvias Campus Living - USG, LLC (the “debtor”) filed a chapter 11 case in … huh? … *checks notes, 🤔* … the District of Delaware (Judge Silverstein); it falls under the larger Corvias Group, LLC umbrella, a property management company that works with more than 15 higher education institutions across six states and the US military. This particular entity has been working pursuant to a partnership agreement (the “agreement”) with the Board of Regents (“BOR”) of the University System of Georgia (“USG”) since ‘15, operating and managing the USG Student Housing Program across nine campuses totaling ~10k student beds and over 3mm square feet of living space.*
The agreement, by all accounts, seems rather straight-forward. The BOR collects student housing revenues and forwards the money over to the debtor. The debtor then uses those funds to take care of the BOR’s base rent, fund reserves for repairs/replacements, and pay operating/maintenance expenses. After satisfying all of those obligations, the debtor can then take a 2% management fee (on gross revenues) and up to 2.25% as a variable incentive fee.
Doesn’t sound patently unreasonable, right? How hard could it be to manage accommodations filled with thousands of partying college students??
Lol …
And it also got pretty expensive.
In the past few years, the partnership with the BOR has become increasingly unsustainable due to inflation and low occupancy. In response to the shifting macro environment the debtor claims that the BOR has done … well … they haven’t done sh*t. Here’s a tidbit from the first day declaration of the debtor’s president, Thelma Edgell:
“In particular, (A) the BOR has not allowed annual increases in student housing fees to keep pace with the market and rising costs (including the fixed rent and charges payable to the BOR that increase annually by 3%), and (B) student occupancy levels have declined.”
But really can you blame the BOR for not wanting to raise tuition when (a) demand is down and (b) students already face insane student loan payments?
Ok, fine, but what about that 3% escalator per year on the fixed rent and charges payable to BOR? Surely, the BOR can be reasonable about that given the student body issue, yeah? YEAH???
Nah, the debtor says the BOR hasn’t budged.
Back to Ms. Edgell’s first day declaration:
“Underlying the USG Student Housing Program was an expectation that the parties in this public private partnership would collaborate to ensure that revenue kept pace with market and operating expenses and debt service. Fundamental to any P3 partnership is a presumption that the parties act collaboratively and in good faith to ensure that revenue and costs are aligned. Despite the Debtor’s repeated requests, attempts, and invitations, however, the BOR has steadfastly refused to work collaboratively with the Debtor (and the Noteholders) on a solution that would make the P3 relationship and the USG Student Housing Program viable now and into the future. The Debtor cannot continue to be the sole party bearing the burden of this unsustainable arrangement and is therefore looking to this process to achieve a comprehensive solution.”
“Good faith” … good one guys.
A stagnating gross revenue number and steadily increasing costs … well you don’t need to be a math wiz to figure out where that goes.
Things got so bad that the debtor has only been able to collect two months worth of management fees since … wait for it … the year two-thousand-motherf*cking-twenty (2020): there was nothing but a 🍩 available for distribution to the debtor after accounting for all the line item expenses.
Did you catch that 👆 reference to noteholders. That’s right. This thing gets worse.
Not only did the debtor bleed money from piss poor general operating activity, it also contributed $22.8mm of cash from its own balance sheet and issued $548.3mm worth of 5.3% senior secured notes just to kickstart the program.** The debtor used $174.6mm of those funds to construct an additional 3.7k beds across the seven USG campuses, renovate 6.2k existing beds, and … wait for it … JFC … pay off $312mm of BOR’s pre-existing debt.
In addition, the debtor also invested capital over the past few years to cover cash shortfalls and otherwise support the housing program.***
And wait … it gets worse(r). (👈 ChatGPT right there … jk).
The notes have been in default for ~4 years now and the oh so gracious noteholders have allowed the debtor to keep using cash (collateral) to maintain its operational needs. And despite work to get to a resolution, four years of work have resulted in … nothing (hence the filing).
In fact, the noteholders and the debtor had recently worked out a bridge that would’ve covered operations until the fall. The noteholders were intent on pursuing an out-of-court solution. Here’s Eversheds Sutherland LLP’s Todd Meyers, on behalf of the noteholders during the “first day” hearing … held seven days after the filing … on July 2, 2025:
“Our belief being that while we were frustrated at the lack of resolution, that an out-of-court solution ultimately should still be given a chance. The debtors obviously felt differently, and they filed bankruptcy last Wednesday to the surprise of the note holders as well as the BOR. Obviously, because it was a surprise, there was no agreement on the use of cash collateral and, frankly, no exit strategy. It was a true free-fall bankruptcy.” (emphasis added)
Lol, the debtor be like:
Of course none of this stopped the debtor from filing an initial cash collateral motion, arguing that the noteholders were adequately protected — even though negotiations with the noteholders hadn’t even commenced. Suffice it to say, the noteholders, still surprised by the filing in the first place, disagreed.**** Remember: there are basically no hard assets here,***** the debtor’s entire business is a singular contract that, as you’ve learned already, is completely unsustainable. Thus, the noteholders’ only “hard collateral” is the debtor’s cash balance.
Back to Mr. Meyers:
“We believed then, and we believe now, that we cannot be adequately protected for the use of our cash collateral on a non-consensual basis. And therefore, absent our consent, cash collateral could not be used.”
So uh … what then? Litigation?
Luckily no. The parties were able to hash out something the night before the hearing that put some of the noteholders’ issues to rest.
Under the second consensual cash collateral order, the debtor is working with $25mm in cash and will see that number dwindle down to $10mm in four weeks. Of that $15mm decline, the debtor has allocated $6mm towards operating expenses and professional fees, with the remaining $9mm earmarked as adequate protection payments for the noteholders.
In addition to the adequate protection payments, the debtor is also promising to deliver on certain milestones. The debtor will have to (i) file a mediation motion within 14 days of the petition date, (ii) obtain a subsequent order requiring the mediation within 30 days, and (iii) procure a binding term sheet within 60 days. We can’t wait to see the presumably bureaucratic BOR hop-to.
Speaking of the BOR, they had thoughts — per Troutman Pepper Locke LLP’s Gary Marsh:
“You know, the BOR doesn't believe it's our fault if you know Corvias now thinks they made a bad deal 11 years ago or that the note holders made a bad loan. You know, they're out $660mm, the 25 million cash collateral is peanuts really because you know If they let the whole thing collapse and they disappear, they get zero — we have our dorms. So I don’t really think that’s happening.”
While the BOR doesn’t believe the noteholders will just walk away with their cash, what’s the other option? Having the noteholders step in and takeover the agreement with the BOR? An agreement that has already proven to be a cash incinerating dumpster fire? Judge Silverstein double-checked …
“I assume that the board is in agreement that the contract is an uneconomic one for the debtor?”
… and Mr. Marsh had this to say:
“You know, I actually think, you know, if the note holders made significant concessions, they could right-size the debt to match the project and then it would be economical for Corvias.”
So yeah, maybe there’s a chance the noteholders can actually turn this around if they do step in, 🙄!
Oh and if you were scratching your head at the choice of venue — wtf does this debtor have anything to do with Delaware — you aren’t the only one. Back to Mr. Marsh:
“I did want to tell you, I did want to mention, and I did tell counsel this morning — all of the counsel — that we are filing a motion to change venue. It’ll be filed no later than Friday. Maybe tomorrow at the earliest and we’d want that set either on the second day hearing or perhaps sooner if the court thinks that’s best.”
He continued:
“The debtor has no employees, there’s no assets in Delaware. All the assets are in Georgia, it’s like a big single asset real estate case. On their top 20 unsecureds, 11 are Georgia. All their utility companies are Georgia. All the insurance is insuring Georgia assets. They’re headquartered in Rhode Island.”
And bam, here it is, the BOR’s motion to transfer venue to the Northern District of Georgia. Judge Silverstein will hear the venue change motion at the second day hearing on July 28 at 2pm ET, which also marks the expiration of the consensual use of cash collateral.
All of which makes for a potentially meaty next hearing. Stay tuned.
The debtor is represented by Morris, Nichols, Arsht & Tunnell LLP (Derek Abbott, Matthew Talmo, Tamara Mann, Brenna Dolphin, Brianna Turner) as legal counsel, CohnReznick Advisory LLC (Eric Danner) as financial advisor, and Holland & Knight LLP as special counsel. The “Corvias Noteholder Group” is represented by Eversheds Sutherland LLP (Todd Meyers, Renée Dailey, John Ramirez, Andrew Polansky) and Potter Anderson & Corroon LLP (Jeremy Ryan, James Risener III, Sarah Gladieux) as legal counsel and FTI Consulting Inc. ($FCN) as financial advisor. The BOR is represented by Troutman Pepper Locke LLP (David Fournier, Gary Marsh, Pierce Rigney). Collateral agent U.S. Bank NA is represented by Shipman & Goodwin LLP (Kimberly Cohen). Corvias Group, LLC, Corvias, LLC, and Corvias Corporate Services, LLC are represented by Landis Rath & Cobb LLP (Adam Landis, Colin Robinson, Katherine Dute) and Goulston & Storrs PC (Douglas Rosner, Timothy Carter) as legal counsel.
*The debtor relies on non-debtors, Corvias Group, LLC, Corvias, LLC, and Corvias Corporate Services, LLC to provide certain shared services like marketing, bookkeeping, and IT. The debtor itself has no employees.
**The notes are secured by liens and leasehold mortgages on all of the debtor’s assets, including the debtor’s leases on the student housing facilities. As of the petition date, there’s $526.7mm of principal outstanding and >$100mm in accrued interest at the default rate.
***In total, the debtor estimates that the value added from the construction work done by the debtor is >$170mm.
****The noteholders, however, did agree to the payment of over $2.2mm to the BOR in connection with a first interim order authorizing the use of cash collateral, entered before the first day hearing on June 30, 2025.
*****The noteholders have a leasehold mortgage emanating out of the agreement but everyone agrees that, given that the debtor owns no real estate, that this is an “empty bucket.”
Company Professionals:
Legal: Morris, Nichols, Arsht & Tunnell LLP (Derek Abbott, Matthew Talmo, Tamara Mann, Brenna Dolphin, Brianna Turner)
Independent Managers: Steven Zimmer, Stephen Gray
Financial Advisor: CohnReznick Advisory LLC (Eric Danner)
Special Counsel: Holland & Knight LLP
Claims Agent: Donlin Recano (Click here for free docket access)
Other Parties in Interest:
Corvias Noteholder Group
Legal: Eversheds Sutherland LLP (Todd Meyers, Renée Dailey, John Ramirez, Andrew Polansky) and Potter Anderson & Corroon LLP (Jeremy Ryan, James Risener III, Sarah Gladieux)
Financial Advisor: FTI Consulting Inc.
Prepetition Notes Collateral Agent: U.S. Bank, National Association
Legal: Shipman & Goodwin LLP (Kimberly Cohen)
The Board of Regents of the University System of Georgia
Legal: Troutman Pepper Locke LLP (David Fournier, Gary Marsh, Pierce Rigney)
Corvias Group, LLC, Corvias, LLC, and Corvias Corporate Services, LLC
Landis Rath & Cobb LLP (Adam Landis, Colin Robinson, Katherine Dute) and Goulston & Storrs PC (Douglas Rosner, Timothy Carter)