Overseas Language School Agent Goes Bankrupt

[Mulboyne]

Asahi: Overseas education broker Gateway21 to file for bankruptcy protection
Gateway21 Co., an education broker that sends Japanese students to overseas language schools, plans to file for bankruptcy protection and may be unable repay students 950 million yen ($8.93 million) in advance payments, sources said Monday. Gateway21, whose total debts will likely reach 1.29 billion yen, has already suspended its business operations and shut down its website...The Tokyo metropolitan government, which has registered Gateway21 as a travel agent, has started collecting information on the company's business. A 27-year-old corporate worker in Aichi Prefecture said she paid about 1.3 million yen in advance payments to the company for a program to study in Canada for a year from January. After discovering that the company's website has been shut down, she visited Gateway21's office in Nagoya only to find a notice saying it has suspended business operations. "I cannot believe this because the company has solicited students until very recently,'' she said. "I now need to confirm whether the payments can be fully returned''...The company's website had said Gateway21 was established in 1997 and sends around 10,000 students to 13 countries, mainly the United States and Australia, a year. It arranges students' entry to language schools abroad as well as their stays with host families...more...

[canman]

It seems the Eikaiwa industry is in big trouble. I don't know if this has anything to do with the collapse of Nova, or just the industry going through some tough times. I doubt if things will ever return to the way it used to be. Small independent schools like James and others is the way to go.

[bolt_krank]

It's the result of bad business practices. The fact that they kept running the business up until declaring bankruptcy shows the company was run by someone riding the eikaiwa wagon to make a few quick bucks.
The company may not be able to pay back the students, but I've got a feeling the CEO got a big bonus recently.

[Mulboyne]

It's the result of bad business practices. The fact that they kept running the business up until declaring bankruptcy shows the company was run by someone riding the eikaiwa wagon to make a few quick bucks.

It's extremely likely that the company was badly run rather than just unlucky but if every company stopped doing business at the sniff of bankruptcy, there wouldn't be very many left.

When a company goes bankrupt, it usually falls into one of two categories. Either total liabilities exceed total assets and it eventually topples under the weight or else total assets exceed total liabilities but the company has no liquidity to meet immediate claims so it is literally insolvent. In the first case, provided you have enough cash, you can keep going for a considerable time while technically insolvent. You can even pull through by getting recapitalized; seeing an increase the value of existing assets or a reduction in the value of your liabilities etc. In the second case, you can be running along quite nicely when one of your creditors unexpectedly calls in a note or a loan. If all your cash is tied up in assets which you can't liquidate in a quick sale, if people who owe you money can't pay it quickly and no bank will tide you over with a bridge loan, then you are bust. In both types of bankruptcy, there are many cases where companies continued to do business in good faith only hours before the shutters come down.

There are a lot of cowboys in the eikaiwa space and Gateway21 may well have been one of them. However, you can't safely draw that conclusion just because it took in revenue shortly before going bust.