Stock Tumbles as NEC Postpones $62-Million Debt

IRVINE — National Education Corp. on Thursday said it has reached a tentative agreement with lenders to extend the due date of $62 million in loans for a year, but the announcement failed to help the company’s stock--its value tumbled 14.9%, the largest percentage loss on the New York Stock Exchange.

Officials of the struggling vocational and educational training firm also told financial analysts and portfolio managers in New York that it was considering such alternative financing as a joint venture or private placement to help the company during seasonal fluctuations in business.

Chairman David C. Jones and President Jerome Cwiertnia told analysts Thursday that they intend to reduce costs at their beleaguered Applied Learning division by at least $20 million over the next year through several means. Included would be additional layoffs beyond the 140 jobs NEC announced earlier for its Naperville, Ill., subsidiary.

NEC management also said during the 90-minute presentation, which analysts termed as generally upbeat, that it hopes to reduce corporate overhead by $5 million during the same period.

“At best it’s doable,” said Jeffrey Kessler, analyst with the New York brokerage of Shearson-Lehman Hutton. “It certainly is not a sure thing.” He said the odds that NEC will report a profit is “virtually nil for the next six to nine months.”

Those in attendance seemed caught off guard by the strong stock market’s reaction, particularly since the company said it had gotten a handle on its problems. The company’s stock fell $1.25 to close at $5.75 during heavy trading.

“There has been anxiety the company might be forced to sell an asset and therefore sell it at a discount if they are in a distressed position,” said Arthur Rade, analyst with the New York brokerage of Merrill Lynch. “I’m surprised about the stock-price action.”

NEC officials, who were in New York for the presentation, could not be reached for comment.

Analysts speculated that the company’s desire to pursue alternative financing could have caused some jitters on Wall Street.

The company’s stock--which has traded for as much as $28 during the past year--has steadily eroded in recent months because of severe problems at its Applied Learning division, which sells educational materials and services to corporations. The subsidiary accounts for about half of NEC’s revenue.

During the last six months, NEC has reported losses of $8 million and seen its stock plunge more than 50%.

Applied Learning has suffered from computer and billing problems, among other things, following a disastrous merger. The company’s customers were either overbilled, undercharged or given free services.

“It will probably take until 1991 before you would see some significant profits in Applied Learning,” said one analyst. “It’s not going to be an overnight turnaround.”

Jones and Cwiertnia did not issue any 1990 forecasts, a move some analysts said contributed to the stock slide Thursday.

“They were cautious in giving any projections,” said an analyst. “Maybe people were looking for more specifics, as to how soon they would turn things around.”

NEC was hit with a class-action lawsuit in October by a New York investor who alleged that the company and its top executives promulgated false and misleading information about NEC’s financial condition during the summer months. Analysts said the lawsuit hampered executives from making any kind of projections at Thursday’s meeting.

Company executives said Thursday that enrollment at the company’s vocational schools is down about 10% but that a flat market was partially offset by a rise in tuition, according to analysts.

NEC is the nation’s largest provider of educational training services and employs about 5,200 people.