Stephanie Irwin Gottschlich writes about higher education.Home > Blogs > On Campus > Archives > 2008 > March > 28
Friday, March 28, 2008
Antioch College takeover negotiations fail: University said it needed $12.2 million in cash up front
(Art Zucker, chair of the board of trustees; Toni Murdock, chancellor.)
3:00 p.m.
Antioch University said this afternoon it rejected an offer from an independent corporation of wealthy alumni to purchase the college for an agreed-upon price of $12.2 million because it needed the whole kit-and-caboodle up front, at closing to keep creditors satisfied.
The Antioch College Continuation Corporation, a Yellow Springs-based non-profit corporation of alumni and former trustees, proposed in December buying the college from the university to make it an independent institution. Negotiations took on a sense of urgency in late February, when the university trustees reaffirmed their June 2007 decision to close Antioch College for a year starting this June, after initial negotiations with the AC3 did not produce an agreement. The final impasse came today, after trustees evaluated what ACCC said was its “best and final” offer Wednesday night.
The university said today the ACCC offered to pay half the purchase price at closing, and then pay the rest over five years. But an installment arrangement would not be acceptable to the university’s creditors “which must ratify the terms of the deal,” the university said. That was the deal-breaker. If they agreed to the deal and for some reason ACCC defaulted on those last remaining payments, “the university’s only remedy wold be to foreclose on the real estate,” Bruce Bedford, chair of the trustee finance committee, said in the statement.
That part about the creditors caught my attention.
In a telephone interview this afternoon, University Chancellor Toni Murdock said that the university’s credit situation isn’t dire, but it does have significant debt in the form of bonds on the new Antioch University McGregor building, and buildings in Seattle and in Keane, New Hampshire.
Transferring the college assets to the ACCC while the university still had outstanding bonds “creates a huge negative impact on the university’s balance sheet,” the university said.
Murdock elaborated. “Because we had so much debt in relation to the bonds we needed to have enough assets to…It put us in financial jeopardy. If you take away all the assets of the college then it gives bankers pause.”
Which begs an interesting question: How important are the college’s assets to the bonds? College faculty, staff and alumni critical of the administration have questioned the university in the past on whether the college’s assets have served as collateral on bonds. The university has always maintained that the bonds were financed based on each campus’ projected revenue, and the college assets were never at risk.
But it appears that nonetheless, the university’s eggs are in one basket. Murdock on the phone said it needed some assets - either the college, or the $12.2 million in cash - if it hoped to secure future loans on other campuses that need updates (Los Angeles, Santa Barbara).
Another sticking point was WSYO, the NPR affiliate station based in Yellow Springs. The ACCC wanted WYSO as part of the $12.2 million purchase; the university said it wanted to keep WYSO but would let the college use it. They couldn’t work that out.
Members of the ACCC said in a statement today the rejected proposal was its “best and final offer,” and it appears their attempt to take control of the college is over.
“Our offer would have enabled Antioch College to thrive and grow, while simultaneously infusing the rest of the university with millions of dollars in cash,” said Frances Degen Horowitz, co-chair of the ACCC and president emerita of the Graduate Center of the City Unviersity of New York. Horowitz is a college alum.The AC3 said it had raised $18 million to operate the college in the short term, and was preparing to launch a fundraising drive to secure a total of $100 million for its long-term future. The group had hired a turnaround management firm to prepare a detailed five-year plan to increase the college’s enrollment and staffing.
It sounds like everyone involved is disappointed.
“To have worked this hard - and be this close - and not have an agreement is truly heartbreaking,” said Art Zucker, chair of the board of trustees in a statement.
“This is a sad day not only for Antioch, but for all those who care about progressive education in this country,” said Eric Bates, co-chair of the ACCC, who participated in the negotiations.
Murdock said administrators are going to rest for awhile, and then by summer will turn to figuring out how to re-open the college after it closes for one year starting June 30. The university’s headquarters will remain in Yellow Springs, she said. Antioch University operates five campuses nationwide in addition to Antioch College, including Antioch University McGregor also in Yellow Springs. Those campuses will remain open.
But there’s another front in the multidimensional fight to keep the college from closing June 30. On Tuesday, April 1, a hearing in Greene County Common Pleas court will hear evidence in a lawsuit Antioch College faculty filed against the university March 10, alleging the university broke its contractual obligation with the faculty in its decision back in June to declare financial exigency and close the school at the end of this academic year.
The faculty seek a permanent injunction requiring the university follow the faculty policies and prevent it from suspending operations. The faculty also ask the court to enjoin the university from liquidating or dispersing its assets, including buildings, land and its endowment.
I’ll be covering the hearing here on the blog.
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