THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, November 12, 1996 TAG: 9611120260
SECTION: LOCAL PAGE: B9 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: LYNCHBURG LENGTH: 50 lines
Liberty University made an overdue $1.1 million payment Monday to bondholders who threatened, for the second time in four years, to get their money by forcing the college to sell its campus.
The bondholders warned Liberty that it had until Tuesday to make the semi-annual payment or face foreclosure.
The Rev. Jerry Falwell, Liberty's founder and chancellor, called the demand ``unreasonable and reckless'' after releasing a statement Monday announcing that the payment had been made.
Attorneys for the school said last week that it could not make the payment without jeopardizing a commitment a bank had made to lend Liberty $7.5 million. Liberty has asked the bondholders to accept that amount as full payment for what it calculates is a $15 million debt.
A committee representing the bondholders, estimating the debt at more than $20 million, has rejected the $7.5 million offer.
But some of the approximately 2,000 bondholders are challenging the committee's rejection.
Under a foreclosure, Liberty's 3,000-acre campus could be auctioned along with other assets to satisfy the debt. The school, which Falwell founded in 1971 as Lynchburg Baptist College, has an enrollment of about 11,000 students.
Liberty restructured its debt to the bondholders after the previous foreclosure threat in 1993. An appraiser hired by the university back then concluded the property was worth between $6 million and $8 million.
DeMoss said it cost about $200 million over the past 20 years to develop the campus and its 64 buildings, including a football stadium and multipurpose arena. He said the appraised value is only a fraction of that amount because it represents what the campus would be worth on the open market. That is why foreclosure on the campus would be a poor option for the bondholders, DeMoss added.
The dispute is over bonds issued in the 1980s by Falwell's now-defunct Old-Time Gospel Hour television program to help fund the university's rapid expansion.
Old-Time Gospel Hour's financial underpinning - donations from viewers of Falwell's television ministry - was devastated in the wake of scandals involving television evangelists Jim Bakker and Jimmy Swaggart in 1987.
In a series of maneuvers to refinance that debt, Liberty took ownership of the campus and other property from Old-Time in 1990 and became responsible for paying back the loans. ILLUSTRATION: Jerry Falwell called the bondholders' demand ``unre-
asonable and reckless'' after the school paid the $1.1 million. by CNB