BRADENTON, Fla. — The 131-year-old Morris Brown College in Atlanta has become the second private, nonprofit college in the Southeast to file for bankruptcy in just over a year.
Morris Brown, which lost its accreditation a decade ago, was forced to file for Chapter 11 last Saturday after an investor holding $13 million of bonds asked the school for payment by Sept. 6, or face foreclosure.
The bonds have been in default since 2007, according to Thomson Municipal Market Monitor, though details are sketchy since the debt was privately placed.
Bishop Preston Warren Williams of the Sixth District African Methodist Episcopal Church in Atlanta, who became chairman of the college’s board of trustees recently, could not immediately provide information about the identity of the bondholder.
Williams said that the bankruptcy petition would stop foreclosure, and allow the college to submit a reorganization plan.
The $13 million of fixed-rate, uninsured bonds were issued on behalf of Morris Brown by the Fulton County Development Authority in 1996.
The bonds were sold with a 7.37% coupon and mature in 2016. Thomson listed the bonds as being in default in 2007.
Since the Development Authority served as a conduit, the agency has no current information about the debt, said the authority’s legal counsel Lewis Horne, a partner at Schiff Hardin LLP.
The agency, created in 1973, is a frequent conduit issuer, he said.
“The Development Authority has had two defaults since 1973, and we think that’s an enviable record,” Horne said.
The first default involved bonds issued for Delta Airlines, when it went into bankruptcy, and now the debt sold for Morris Brown.
“The bottom line is we recognize that Morris Brown filled a historic mission among historically black institutions, and the Development Authority is cognizant of the great role [the college] played in the past,” he said.
Morris Brown has struggled financially for years, though court documents indicate the college had hired a consultant and was working on a long-term strategic plan. Without accreditation, the college could not qualify for federal funding, and its students — down to about 50 — were not eligible for federal financial aid, according to an affidavit filed with the bankruptcy court by college President Stanley Pritchett.
According to the college’s petition for reorganization, Morris has more than 200 unsecured creditors with assets and liabilities both estimated at between $10 million and $50 million.
Bankruptcy Judge Barbara Ellis-Monro has given the college until Sept. 25 to file schedules of assets and liabilities, current income and expenditures, contracts and unexpired leases, a statement of financial affairs and related documents.
Morris Brown has long been overshadowed among the five historically black colleges and universities in the Atlanta area, a person familiar with the schools said. Others better-known and financed include Spelman College, Morehouse College, and Clark Atlanta University.
Pritchett’s affidavit said Morris Brown plans to emerge from bankruptcy in a stronger financial position that will enable it to pursue accreditation with Transnational Association of Christian Colleges and Schools.
Other colleges in the Southeast have struggled in recent years.
The private, nonprofit Lambuth University in Tennessee lost its accreditation, filed for bankruptcy and closed last year.
In July, West Virginia’s Mountain State University lost its investment-grade rating after announcing that it may lose its accreditation.