A Birmingham-Southern College (BSC) spokesperson restated their position Monday that they should’ve been given a state loan in response to a statement over the weekend by Alabama State Treasurer Young Boozer calling them a “terrible credit risk.”
BSC is on the brink of a possible shutdown due to financial missteps by the College’s administration in previous years and declining enrollment. Boozer recently denied a $30 million state loan to bail the private school out.
Legislators passed the Distressed Institutions of Higher Education Revolving Loan Program and appropriated $30 million in the 2023 legislative session. The Alabama State Treasurer’s Office administers the program.
Montgomery County Circuit Judge James Anderson dismissed a lawsuit last week filed by Birmingham-Southern against Boozer for the loan denial.
Officials with the Alabama State Treasurer’s Office said on Sunday to 1819 News that they followed the law denying the loan and that BSC has a credit rating “one step above default.” They added that BSC’s president, Daniel Coleman, “now attempts to deflect blame and attack the Treasurer’s character in the court of public opinion.”
“I am disappointed with the incendiary rhetoric of President Coleman. He falsely claims that I acted arbitrarily or capriciously, or in bad faith, or misinterpreted the law in question. I did not. President Coleman is wrong,” Boozer said in a statement.
An Alabama State Treasurer’s Office spokesperson said the loan denial was “based on insufficient collateral and the lack of a first perfected security interest in all collateral assets.”
“Contrary to the statement of President Coleman, the Treasurer has not stated that the College was ‘not a good credit risk,’ but instead, has stated that the College is a ‘terrible credit risk.’ The College’s Moody’s credit rating of Caa2 confirms it to be a junk bond, one step above default,” the spokesperson said in a statement.
BSC officials responded to Boozer on Monday.
A BSC spokesperson said, “The Treasurer claims to have informed the College “months ago” that it would not qualify for a loan under the Distressed Institutions of Higher Learning Revolving Loan Fund Act. That and many other assertions are simply not factually accurate.”
“The Treasurer has also said the reason he denied the loan is because BSC is a ‘terrible credit risk,’ a fact not in dispute and, in fact, was the impetus for the legislation, which he lobbied against before its passage. If a college or university had an A rating from Moody’s or an excellent credit rating or the ability to borrow more from a bank, that institution would not qualify for the Distressed Institutions of Higher Learning Revolving Loan Fund because it would not be ‘distressed.’ But because BSC is distressed, the Treasurer says the College does not qualify,” the spokesperson said. “However, the Distressed Institutions of Higher Learning Revolving Loan Fund has no criterion based on bond ratings of applicants. Even if it did, the bonds referred to by the rating agencies do not have the collateral that was offered to the State, which was more than sufficient to protect the State in case of default. “Junk bonds” – to which the Treasurer compared BSC’s bond status -- are not backed with U.S. Treasuries and assets valued at 4.5 times the initial draw on the requested loan. The rating agencies would not have seen BSC’s financial restructuring plan, which will put the College back on its feet by academic year 2026-2027.”
Boozer saw that restructuring plan in May, even before the bill established the loan fund, according to BSC.
“BSC has presented two proposals that put the State in the best possible position for payback of the loan that will keep the College open. We have been fully transparent about our challenges – how we got here, what it will take to move forward, what we can offer to ensure the State is protected, and how we will make sure we are never in this position again,” the BSC spokesperson said.
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