An unnamed longtime backer of Liberty University has paid off 1,600 individual bondholders who had the power to foreclose the Lynchburg, Virginia, school founded by Jerry Falwell.
In a settlement concluded September 24, bondholders received $27 million that Liberty had failed to pay back on time for 1982 and 1989 bond sales through Falwell's television show, the Old Time Gospel Hour. Bondholders received 83.5 percent of their original investments.
"Under the circumstances it was the best we could do," says Bob Newell of Seffner, Florida. "We would have liked to have received all our money—even all our principal—but it's time to get out and not prolong it. Most of us are old folks who really need the money."
Newell, 65, had been on a six-member bondholders' negotiating committee (CT, Dec. 9, 1996, p. 66) that had been sued earlier by some bondholders for refusing to accept a 50 percent buyout. Only a dozen of the 1,600 bondholders expressed opposition to this settlement.
The agreement clears up all claims of individual bondholders against the school. The donor negotiated directly with the bondholders' committees anonymously. Liberty had no role in the discussions.
The same individual had purchased $3.5 million worth of bonds at 100 percent face value in March. But some bondholders had received no money since November 1996, when Liberty made an overdue $1.1 million payment to stave off foreclosure by the bondholders, who held first and second liens on the campus.
"I didn't expect to see such a payout," says Chuck Graham, a 69-year-old bondholder from Belleville, Illinois, who invested $50,000 in 1989. "I'd call it a miracle."
School spokesperson Mark DeMoss declined to identify the donor other than to say he is a Christian businessman who "has supported the school for a number of years in a low-profile way."
BRIGHTER FUTURE: "Any precarious position the school was in in recent years has been eliminated," DeMoss says. "This will be the first year in a long time the school will meet its budget."
Now Liberty has only one remaining debt—of $10 million—to one local bank. Seven years ago, Liberty's debts totaled $110 million.
Liberty, with an on-campus enrollment of 5,400 and another 9,000 in external programs, has started a separate capital improvement campaign to expand and update facilities. "The board of trustees has prohibited incurring further debt," DeMoss says.
The Southern Association of Colleges and Schools (SACS) placed Liberty on probation in December 1996 because of ongoing financial problems (CT, Feb. 3, 1997, p. 74). A decision will be made this month whether to lift the probation.
The board in September named interim president John Borek to the post permanently. Before coming to Liberty (CT, Sept. 1, 1997, p. 94), Borek, 54, had been chief financial officer at Georgia State University and had chaired 30 SACS committees. Falwell, 64, remains chancellor.
"We just thank the Lord that some multimillion-dollar white knight came on the scene," Newell says. "It's been a long ordeal."
Copyright © 1997 Christianity Today. Click for reprint information.
December 8, 1997 Vol. 41, No. 14, Page 61
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