BRADENTON, Fla. — Lambuth University in Jackson, Tenn., has filed an audit that “raises substantial doubt about its ability to continue as a going concern.”
The audit for the fiscal year that ended June 30, 2010, was filed on the Municipal Securities Rulemaking Board’s EMMA website on Wednesday. It is believed to be the school’s first financial disclosure to bondholders since 2007.
The university’s audit mentions nothing about its difficulties with accreditation, which were ongoing before the end of fiscal 2010. The audit says Lambuth is in technical default on its bonds but provided no details.
Though it has been at least a month since Lambuth officials announced locally that the university is closing on June 30, no disclosure about closing has been made on EMMA.
Investors hold $5.3 million of the university’s outstanding taxable and tax-exempt debt, which is insured by Radian Asset Assurance Inc. Radian said last week that its policy is “in full force and effect.”
Some bonds traded as recently as Thursday. In one series, a customer bought $25,000 of tax-exempt bonds for 81.9 cents on the dollar at an interest rate of 11.38%. In another series, a customer bought $65,000 of tax-exempt bonds for 63.3 cents on the dollar at an interest rate of 12.77%.
The university is in negotiations for the sale of its campus to a consortium consisting of the city of Jackson, Madison County, the Jackson Energy Authority, and West Tennessee Healthcare.
The consortium has offered Lambuth $5.9 million for the campus.
Lambuth’s outstanding long-term debts are more than $10 million, which includes bonds.
“The university has suffered recurring losses from operations and has a net deficit in unrestricted net assets. This raises substantial doubt about its ability to continue as a going concern,” auditors said in a Sept. 24 letter to Lambuth’s Board of Trustees.
“As indicated in the accompanying financial statements, the university had a decrease in net assets of $1,581,326 during the year ended June 30, 2010,” auditors said. “The university has had a decrease in net assets for seven of the last eight years.”
Lambuth had total assets of $17,102,643 and total liabilities of $14,108,081 nearly 11 months ago at the end of fiscal 2010.
Michael Keeney, the chairman of Lambuth’s Board of Trustees, said negotiations with the consortium are ongoing.
“With so many entities involved, it is quite a process. Negotiations are being conducted through attorneys and committees,” he said. “We are hoping to come to a point where we can agree and the campus becomes a satellite of the University of Memphis.”
The university is the midst of several fundraising campaigns reportedly to pay salaries and to fund a short summer session of classes designed for a limited number of students who needed just a few credits to graduate.
A campaign is under way to sell remembrance bricks to raise money.
On Saturday, Lambuth will auction off historical artifacts and antiques, including art, furniture, vintage wedding dresses, rare books, pianos, and even its library stacks.
The Jackson Health, Educational, and Housing Facility Board was the conduit issuer for Lambuth’s $6.78 million of Series 1995A tax-exempt revenue bonds and its $1.7 million of Series B taxable revenue bonds.
The deal included serial bonds that have since matured. Some term bonds remain outstanding, with maturities in 2015 and 2020.
In 2009 and 2010, notices about draws on reserves to make debt service payments were filed on EMMA by the bond trustee, the Bank of New York Mellon Trust Co.
According to court documents, Lambuth’s accreditation problems surfaced in June 2009, when it was placed on probation by the Southern Association of Colleges and Schools Commission on Colleges Inc., or SACs, an accrediting agency.
The association withdrew its accreditation on Dec. 6, and denied a Feb. 23 appeal by Lambuth.
On Feb. 24, Lambuth filed suit in the Northern District of Georgia and a federal judge granted a preliminary injunction blocking SACs from withdrawing its accreditation. The suit is still pending.
Currently, the goal is for the campus to become part of the University of Memphis, which is part of the state university system. Funds for the first year of operations have been included in the recently passed state budget.