Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 6, 1994 TAG: 9404060028
SECTION: VIRGINIA PAGE: C-1 EDITION: STATE
SOURCE: Associated Press
DATELINE: LYNCHBURG LENGTH: Medium
Students could end the year believing their prayers were answered. The Christian college founded by the Rev. Jerry Falwell managed to carry its debt and make scheduled payments to creditors.
Two Liberty University supporters purchased nearly $29 million of the school's $73 million debt, allowing Liberty to make headway in its efforts to gain financial stability, a school spokesman said.
"In the last year, remarkable progress has been made," said Falwell spokesman Mark DeMoss.
More than $60 million of the debt is owed to three major creditors:
Bondholders who invested in a Falwell broadcast, Old Time Gospel Hour, in the 1980s.
A New Hampshire insurance company that lent Liberty $16 million in 1990.
The Liberty supporters who bought up debts from other creditors.
DeMoss said the 23-year-old school's progress in debt restructuring was made possible because of the "cooperation of creditors, who didn't have to cooperate, and . . . some good friends of the university, who have provided money or purchased portions of the debt."
But the News & Advance of Lynchburg reported Monday that the school's payments to the insurance company covered only interest on the debt, and payments to the bondholders covered only a small portion of the interest on that debt.
Christian Mutual Insurance Co. is owed $14.2 million for loans it made to the school in 1990. The company is getting a share of revenues from Liberty's video education degree program and mortgage payments for the university's senior dormitory.
The newspaper reported that the 2,200 bondholders, who are owed more than $18 million plus interest, have the first lien on the school's campus and 200 additional acres of school property. The school made a $300,000 payment to the bondholders last year. It does not cover the 6 percent interest accruing on the debt.
The bondholders and Liberty agreed to a payment schedule that calls for annual increases in Liberty's installments. In five years, Liberty would have paid off all of the interest and a small part of the principal.
At that time, the school would pay off the remainder of the debt in a single payment - about $18 million.
The two supporters, Jimmy Thomas and Daniel Reber, both of Lynchburg, have formed a nonprofit corporation to buy up some of the school's debts at discounted rates. The newspaper reported that there appears to be no formal agreement between the school and the corporation to repay those debts.
The corporation, World Help, bought $12.6 million in outstanding loans in November 1992 from Church and Institutional Development Corp. of Texas for $2.5 million.
Last fall, Reber and Thomas also put up undisclosed amount of money to purchase Household Finance's $16 million debt when the company threatened to foreclose on the university, the newspaper reported.
While the school has struck deals with its three major creditors, it has abandoned efforts to come up with a plan for paying all creditors, mainly because the other creditors were at odds over any one plan.
"The workout plan would have required every creditor to accept a specific plan with specified terms," and anyone opting out of it would have sabotaged the deal, DeMoss said.
The school has been making regular payments to many of the other creditors and will try to consolidate the debt further, DeMoss said.
"That's the goal, to consolidate everything with one loan and one creditor," he said. DeMoss said such an arrangement could come by the end of the year.
by CNB