Charter School Capital Chapter 11: $80M Sale, Liquidating Plan

Charter School Capital's chapter 11 case follows $189.5 billion in federal pandemic relief that reduced demand for receivables financing among charter schools. The Portland, Oregon-based company—founded in 2006 by Stuart Ellis and Brad Coburn to purchase future state funding receivables from charter schools—filed for bankruptcy on June 8, 2025, after ESSER funds eliminated demand for its working capital solutions. At its peak the company had deployed approximately $3 billion in funding to over 900 schools serving 2 million students.

The case unfolded alongside a dispute with majority investor Orthogon Partners, which held 52.1% of the company and won a $3.06 million arbitration award just weeks before the filing. Through an expedited 51-day sale process, New GS, LLC acquired substantially all assets as the stalking horse bidder for a purchase price of not less than $80.65 million—consisting of $15.5 million in cash plus assumed mortgage debt, a Bank of America credit line, construction contracts, and bridge notes—with no competing bids emerging despite investment banker Rock Creek Advisors contacting 306 potential buyers. The liquidation plan confirmed on November 26, 2025 provides 100% recovery to the $3.7 million in general unsecured claims and 0–7% to Orthogon's $58 million in preferred equity. The plan became effective on December 3, 2025.

Court	U.S. Bankruptcy Court, District of Delaware
Judge	Hon. Craig T. Goldblatt
Case Number	25-11016
Debtor(s)	Old School, Inc. (f/k/a Charter School Capital, Inc.)
d/b/a	Grow Schools
Petition Date	June 8, 2025
Sale Closing	July 29, 2025
Confirmation Date	November 26, 2025
Effective Date	December 3, 2025
DIP Facility	$5 million (lender: East West Bank, N.A.; interest rate: 12% PIK)
Purchaser	New GS, LLC
Potential Buyers Contacted	306
Competing Bids	None
General Unsecured Recovery	100% ($3.7M)
Preferred Equity Recovery	0–7% ($58M)

Receivables Financing Model and Charter School Market

Charter School Capital was founded in 2006 by Stuart Ellis and Brad Coburn, both graduates of the University of California, Berkeley. Ellis, who served as President and CEO, invested 50% of his personal net worth in the startup. Coburn, who became Chief Investment Officer, had started his finance career at Credit Suisse First Boston before meeting Ellis at Berkeley. The company developed a specialized financial product: purchasing accounts receivable representing future state per-pupil funding owed to charter schools at a discount, providing immediate liquidity to schools waiting for government payments.

Scale and market penetration. By the time of bankruptcy, Charter School Capital had deployed approximately $3 billion in funding to over 900 charter schools, supporting more than 2 million students—approximately one in eight of the 8,000 charter schools operating in the United States. Ellis was named Ernst & Young's Entrepreneur of the Year in 2011.

Business lines. The company operated three divisions. The core receivables financing operation (Money To Run Your School) purchased future state education funding from charter schools through non-debtor subsidiary Public Charter School Receivables Company, LLC. This line financed approximately $300 million in receivables annually at peak, though volumes had declined sharply by the time of filing, with only 15–20 active school clients remaining. A real estate platform (Money To Buy Your School) helped charter schools source, develop, and finance permanent facilities—in 2014, the company announced a $500 million facilities program through American Education Properties, and acquisitions included three school facilities for $19.1 million in 2016 and five Florida facilities for $71.74 million in 2017. A third line (Kids To Fill Your School) provided enrollment marketing services to 36 schools at filing.

Rebranding. In November 2023, Charter School Capital rebranded to Grow Schools. The legal corporate name remained Charter School Capital, Inc. while the company operated under the Grow Schools brand, with headquarters at 1000 SW Broadway in Portland.

Funding History and Orthogon Equity Stake

The company raised $67.1 million over three funding rounds through 2021, including a $17 million venture round in April 2020 and a $48.6 million round in May 2021—coinciding with the start of pandemic relief programs that reduced demand for the company's core products.

Orthogon Partners investment. In March and June 2023, existing preferred shareholder Orthogon Partners agreed to purchase $11.6 million of preferred equity securities. Orthogon, a New York-based private investment firm led by Rishi Ganti, deployed capital through two vehicles: Orthogon Charter School Special Opportunities LLP and Orthogon Charter School Special Opportunities II, LP. This investment increased Orthogon's stake to 52.1% on a fully diluted basis, making it the controlling shareholder.

Equity distribution at filing. The First Day Declaration disclosed the following ownership structure:

Ellis maintained control of voting rights through his holdings of Common A Shares, despite Orthogon's larger economic stake. Orthogon appointed Dr. Rishi Ganti to serve as its board representative.

Capital structure at filing. The company reported $10 million to $50 million in both assets and liabilities, with between 200 and 999 creditors. Key liabilities included approximately $700,000 in prepetition unsecured trade obligations, the ~$3.06 million Orthogon arbitration award, and ~$58 million in preferred equity claims. Cash on hand was approximately $1.29 million. The debtor had no secured or unsecured funded indebtedness, but had guaranteed obligations of indirect subsidiary GS 50 2nd Street, LLC under a loan agreement with Building Hope Finance in the principal amount not to exceed $8.5 million. The company also held significant intercompany receivables: approximately $1.24 million under the CSRC Intercompany Note and approximately $16.95 million under the CSREC Intercompany Notes.

ESSER Disruption and Failed Capital Raise

The First Day Declaration identified multiple converging factors that drove the chapter 11 filing.

ESSER disruption and demand collapse. Congress allocated $189.5 billion in one-time funding for school districts through the Elementary and Secondary School Emergency Relief (ESSER) program. Charter schools that previously needed to sell future receivables for working capital had direct access to federal funds, eliminating the need for third-party financing. The First Day Declaration confirmed that governmental agencies provided substantial monetary relief to public educational institutions and that the primary population served by the receivables business had experienced "a substantial decrease in the need for ongoing receivables financing." Receivables volume dropped from $300 million annually at peak to $32.6 million in 2024—a reduction of approximately 89%. Although the pandemic funding programs have concluded, schools generally remained in relatively strong financial condition with limited need for additional financing. S&P Global maintained a stable outlook for charter schools in 2025, and charter school enrollment grew 11.7% from fall 2019 to fall 2024 even as traditional public school enrollment fell 3.9%. The charter school market reached $49.6 billion in 2025.

Failed capital raise and mounting liquidity pressure. Since at least 2022, the company and its subsidiaries had experienced significant liquidity issues. The company unsuccessfully sought equity capital and other financing from 2022 through the petition date. Throughout 2023–24, the company engaged in multiple rounds of discussions with real estate lenders seeking higher advance rates for its SPE property acquisitions, but these did not produce transactions sufficient to address liquidity challenges. A significant increase in interest rates and real estate carrying costs, combined with disruptions to the municipal bond market that the company needed to access to exit property investments, created additional financial stress. The company reduced workforce headcount by approximately 40% since 2022, and worked with Colliers, CBRE, Raymond James, Morgan Stanley, and AON to market properties and raise financing, but these efforts proved insufficient.

Investor litigation. The Orthogon dispute consumed management attention and resources while creating uncertainty for potential acquirers. The $3.06 million arbitration award represented immediate liquidity pressure on top of the ~$1.29 million cash position at filing.

Board reconstitution and filing. In mid-April 2025, the board—consisting of Stuart Ellis (with four votes), Bradley Coburn (one vote), and Rishi Ganti as Orthogon's representative (one vote)—considered appointing independent directors to assess strategic alternatives. On May 15, 2025, Coburn resigned from the board, and Edward Weisfelner and Craig Jalbert were appointed as independent directors. Weisfelner, a Senior Managing Director at the Algon Group, brought over 30 years of restructuring experience including leading roles in Puerto Rico, General Motors, American Airlines, and Energy Future Holdings. Jalbert, a principal at Verdolino & Lowey, P.C., had served as officer and director for distressed companies over a 30-year career. The board delegated to a Restructuring Committee full authority to review, consider, and approve strategic alternatives—including authority to commence a chapter 11 case. Rock Creek Advisors was engaged on June 3, 2025 to lead the sale process.

Orthogon Dispute and Arbitration

The company's liquidity challenges were compounded by a dispute with its majority investor that resulted in a $3.06 million arbitration award weeks before the bankruptcy filing.

Origins of the conflict. Orthogon's $11.6 million preferred equity investment in 2023 included certain financial diligence materials from Charter School Capital. In August 2023, errors were identified in that financial diligence, and Orthogon demanded the return of its investment. The capital had already been deployed to acquire real estate, making it infeasible to quickly liquidate the acquired properties or reverse the acquisitions to redeem Orthogon's preferred equity.

Settlement framework collapse. The First Day Declaration describes that in June 2024, the parties began discussions around a settlement, drafting the "CSC Preferred Stock Framework." This framework contemplated that Orthogon would toll its claims against the company and receive certain rights with respect to asset monetization transactions and use of proceeds. However, the final documentation was never executed. In November 2024, the company closed on a transaction involving the sale of two school properties, an asset purchase agreement for a third property, and refinancing of another property. Board representative Dr. Rishi Ganti reversed his earlier support and voted against the transaction at the board meeting where final approval was considered. The board approved the transaction over Ganti's objection, and it closed on November 14, 2024.

Arbitration proceedings. Orthogon challenged the November transaction as a breach of the CSC Preferred Stock Framework, filing an arbitration demand on December 20, 2024 with the American Arbitration Association. Charter School Capital responded and filed counterclaims. On May 22, 2025—seventeen days before the bankruptcy filing—the arbitrator issued an award in favor of Orthogon in the amount of $2,840,666.97, plus attorney fees of $213,975 and costs of $7,234.49, in addition to pre-judgment and post-judgment interest. Orthogon filed a petition to confirm in New York State Court on May 29, 2025, refiling on June 4, 2025 with a return date of June 12, 2025.

Impact on sale process. The First Day Declaration emphasized that confirmation of the arbitration award and enforcement of any resulting judgment posed an immediate threat to the company's ability to continue as a going concern and consummate a value-maximizing transaction. Parties with whom the debtor had been engaged in sale discussions had expressed reluctance to move forward with the arbitration overhang unresolved.

East West Bank DIP and Section 363 Sale

DIP facility. The debtor secured a $5 million debtor-in-possession financing facility from East West Bank, N.A. to fund the bankruptcy proceedings and sale process. The facility carried a 12% PIK interest rate (14% default rate), with an initial maturity of August 6, 2025 and a 30-day extension option. Fees included a 2.5% upfront fee, 5.0% exit fee, and 2.0% extension fee if exercised. The DIP was secured by superpriority administrative expense claims under section 364(c)(1), first-priority liens under section 364(c)(2), and priming liens under section 364(d)(1). Interest was payable in kind rather than cash—reducing immediate liquidity demands. The Interim DIP Order was entered on July 2, 2025, authorizing access to the first $2.5 million. The Final DIP Order followed on July 16, 2025, approving the full facility. Budget compliance required operating disbursements to remain within 120% of budgeted amounts, with weekly and monthly variance reporting.

Marketing campaign. Rock Creek Advisors contacted approximately 306 potential buyers. No competing qualified bids emerged beyond the stalking horse offer. The sale motion explicitly stated that the debtor lacked liquidity for a prolonged process and needed an "orderly but expeditious" sale. An April 2025 stock acquisition proposal had evolved by late May into the section 363 transaction structure.

Stalking horse and sale. New GS, LLC, an entity formed by American Infrastructures Partners, was designated as the stalking horse bidder on July 2, 2025. The stalking horse APA set a purchase price of not less than $80,651,347, consisting of $15.5 million in cash plus assumed mortgage debt, a Bank of America credit line, construction contracts, bridge notes, and other assumed liabilities. Bid protections included a $620,000 breakup fee and up to $300,000 of expense reimbursement. Robert B. Hellman, Jr. filed a declaration in support of the sale, with Morgan Lewis & Bockius LLP serving as counsel to the purchaser.

Auction cancellation and closing. On July 17, 2025, the court filed notice that the auction was cancelled due to the absence of any competing qualified bids. The sale was approved on July 26, 2025, with the court finding the APA was negotiated at arm's length and designating New GS, LLC a good-faith purchaser under section 363(m). Assets transferred free and clear of liens other than permitted encumbrances and assumed liabilities, with existing liens attaching to net proceeds. The sale closed on July 29, 2025—51 days after the petition. Following the closing, the debtor filed to change the case caption to "Old School, Inc." on August 28, 2025.

Liquidating Plan and Orthogon Settlement

With substantially all operating assets sold, the remaining estate proceeded through a liquidation plan to distribute sale proceeds and resolve claims.

Plan documents and confirmation. The debtor filed a Second Amended Combined Disclosure Statement and Plan on October 9, 2025, followed by a Third Amended version in November 2025. The Confirmation Order was entered on November 26, 2025, approving the Third Amended Combined Disclosure Statement and Chapter 11 Plan of Liquidation. The plan became effective on December 3, 2025.

Creditor treatment. The plan provided for the following distributions:

Orthogon settlement. Under the confirmed plan, Orthogon's claim was allowed as a Class 3 general unsecured claim in the amount of $3,145,476.80. In exchange, Orthogon agreed to support the plan and switch its vote to accept. The plan administrator was directed to make the Orthogon distribution no later than December 31, 2025 unless otherwise agreed in writing. The confirmation order approved the Orthogon stipulation under Bankruptcy Rule 9019. The plan also preserved retained causes of action, expressly including claims against Dr. Rishi Ganti and the Orthogon entities.

Plan administrator. Verdolino & Lowey, P.C. was named as plan administrator under a plan administration agreement granting trustee-like authority over liquidation, claims reconciliation, distributions, litigation, professional retention, tax compliance, and estate privilege control.

Professional retentions and fees. Goodwin Procter LLP served as debtor's lead counsel, with Potter Anderson & Corroon LLP as Delaware counsel, Rock Creek Advisors as investment banker, and Epiq Corporate Restructuring, LLC as claims and noticing agent. The Omnibus Order Approving Final Fee Applications, entered February 12, 2026, approved aggregate final fees and expenses of $3,994,153.45.

Contested matters. Orthogon filed preliminary objections to the sale motion on July 17, 2025, and the U.S. Trustee objected to the bidding procedures on July 21, 2025. The debtor filed an Omnibus Objection on October 24, 2025 seeking to reclassify and subordinate certain claims asserted by Stuart Ellis and Brad Coburn. A court-approved Subordination Stipulation on November 19, 2025 addressed subordination and allowance of the founder claims. On October 6, 2025, the court approved a Settlement Agreement between the debtor and former employee Molly Claire Benjamin, resolving discrimination and retaliation claims for $30,000.

Key Timeline

Frequently Asked Questions

What caused Charter School Capital to file for bankruptcy?

Federal COVID-19 relief through ESSER funds provided charter schools with $189.5 billion in direct support, eliminating demand for the company's receivable financing products. Receivables volume dropped from $300 million annually at peak to $32.6 million in 2024. A dispute with majority investor Orthogon Partners resulted in a $3.06 million arbitration award just weeks before filing, creating additional liquidity pressure.

Who was Orthogon Partners and what caused the conflict?

Orthogon Partners was a New York-based private equity firm that invested $11.6 million in preferred equity in 2023, acquiring a 52.1% stake. The conflict arose after errors were identified in financial diligence materials. Orthogon demanded return of its investment, but the capital had been deployed into real estate. The dispute escalated through failed settlement negotiations and resulted in a $3.06 million arbitration award in Orthogon's favor seventeen days before the bankruptcy filing.

What was the sale outcome?

New GS, LLC acquired substantially all assets as the stalking horse bidder for not less than $80.65 million, consisting of $15.5 million in cash plus assumed liabilities. Despite 306 potential buyers being contacted, no competing qualified bids emerged, and the sale closed 51 days after the petition.

How will creditors recover?

General unsecured claims of approximately $3.7 million will be paid in full with interest, representing 100% recovery. Orthogon's claim was allowed as a Class 3 general unsecured claim at $3,145,476.80 as part of a plan settlement. Preferred equity is projected to recover 0–7% on $58 million. Common equity was cancelled.

What happened to the Grow Schools brand?

The operating business was sold to New GS, LLC. The remaining bankruptcy estate was renamed "Old School, Inc." to proceed through the liquidation plan and distribute remaining proceeds to creditors.

Who is the claims agent for Charter School Capital?

Epiq Corporate Restructuring, LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

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