Seeking +/- 120 million debt to finance the top universities for the development of online degree program

Industry

Financial Services

Company Type

Specialty Finance – Education Program Finance

Location

United States

Size

$120,000,000

Investment Type

Equity/Debt

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Helping Great Companies Grow

Overview

  • Noodle Finance Co. (“NFC”) originates, finances, and manages loans to top universities for the development of online graduate degree programs
  • U.S. online graduate education is a $24 billion annual market which is rapidly growing to match or exceed the $80 billion traditional ground-based education market
  • Most universities outsource online operations to third-parties known as OPMs (online program managers). NFC is the exclusive financing provider to the fastest-growing OPM, Noodle Partners (“Noodle”). Noodle is led by well-known ed tech executive John Katzman – who pioneered the industry as founder and CEO of 2U, Inc. (NYSE: TWOU: $60) and Princeton Review (IPO 2001, Sold to Bain)
  • Noodle Partners and NFC will provide 20% as first loss (Noodle Partners 15% equity / NFC 5% preferred equity)
  • Significant value can be created just by executing the current NFC pipeline. Current NFC pipeline is more than $300 million across 60 universities
  • NFC seeks to raise +/-$120 million of debt to finance the immediate pipeline

Education market data obtained from Noodle Partners Investor Leave Behind Deck

Helping Great Companies Grow

Opportunity

  • Online degree programs cater to today’s graduate students and are growing rapidly
  • The online education market has the potential to match the $80 billion U.S. ground-based graduate education market, and even exceed that by offering highly valued U.S. education online as an export to students around the globe.
  • Rapid growth of the online higher education market is reflected by progress of 2U (NYSE:TWOU), currently the largest provider in this space (zero to $300 million in revenue in nine years) with a $5 billion market cap

Contract Cash Flow analysis of NFC relative to 2U suggests a $400 million valuation at current projections 

Helping Great Companies Grow

Solution/Strategy

  • NFC’s business is to directly invest in loans which allow universities to develop their online degree program and also to manage these loans on behalf of investors
  • Direct Investment
    • NFC invests approximately $2.5 million per program for development
    • NFC earns a rate of 1ML + 11.75% on these loans and expects to finance them for 1ML + 7% and thus earn a leveraged return of about 20% net of expenses
  • Management of Loans
    • Noodle Partners and NFC will provide 20% as first loss  – NFC earns a management fee on the assets managed for Noodle
    • NFC can earn management fees on loans it chooses not to invest in directly
Helping Great Companies Grow

Management

Christopher Ricciardi

CEO

Chris is co-founder of Noodle Finance Co. and responsible for OPM loan program structuring and securitizations. Also founded PLAAY Sports, an AI-driven sports video technology company. From 2010-2017 was a principal at Mead Park Investments managing structured credit vehicles. Prior positions include President and CEO of Cohen & Co., a publicly-traded investment firm with over $40 billion of structured investments, and Global Head of Structured Credit Products at Merrill Lynch, Credit Suisse, and Prudential. MBA from Wharton and a BA in economics from University of Richmond. CFA charterholder. On the Advisory Boards of the University of Richmond and has been a Director and the Treasurer of the American Fund for the London School of Economics.

Charles Trafton

CIO

Chuck is co-founder of Noodle Finance Co. and responsible for our investment strategy and product development. Leveraging two decades of fundamental research in the education, financial and technology sectors, Chuck is also Managing Partner of FlowPoint Education Management, and lead portfolio manager for the FlowPoint Capital Partners LP and its K-20 Education Partners LP. Prior, Chuck was a portfolio manager and analyst at The Boston Company Asset Management, a $55 billion asset manager. He was a member of the Small Cap Growth team that managed $3 billion in U.S. small, mid and micro-cap funds. Chuck is an award-winning analyst, including being voted an Institutional Investor magazine “All-America Health Care Research Analyst” at Canaccord Genuity (formerly Adams, Harkness & Hill) and a Greenwich Associates “4-Star” Analyst at Cowen & Co.

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Thanks, Ken

Ken Margolis | Managing Partner Castle Placement, LLC
1460 Broadway Street, Rte 400
New York, New York 10036
(212) 418-1188 | C: (516) 712-7784
kmargolis@castleplacement.com

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