After University administrators announced they were planning for the possibility of financial exigency Wednesday, investors pulled out of a large part of a $114 million bond agreement with the University on Friday.
The withdrawal of the investors was announced by Louisiana State Treasurer John Kennedy in a news release on Friday. However, according to an email from University Media Relations director Ernie Ballard, the investors were notified on Friday the bond sale was postponed.
“It became evident there were concerns among investors due to the unpredictability of the state budget and its potential impact on LSU, and it became prudent to postpone the sale at this time,” according to Ballard’s email.
A broadcast email from the Office of Communications and University Relations announced the University planned to postpone issuance of the $114.5 million in Series 2015 Auxiliary Revenue and Refunding Bonds.
The University issued $114 million in revenue and refunding bonds Tuesday to save tax funds for a Family Housing Complex, residence halls and the Student Health Center, according to Kennedy’s release. The bonds could have also saved interest on debt.
According to Ballard’s email, universities sell bonds to finance capital projects. In this case, the University planned to use the funds for auxiliary projects for residence halls, as well as to refinance bonds from 2007 – 2008.
According to Kennedy’s release, the University’s budget instability was a red flag for investors.
“We’re trying to sort out the facts. This is obviously not a welcome development,” said Kennedy in the statement. “It could have ramifications for other universities in Louisiana and for the state’s overall bond rating, and it could impact the interest rate on future state bond issues, including an upcoming $300 million state general obligation bond issue.”
No money had exchanged hands yet, and the sale was not expected to be finalized until next week, according to Ballard’s email. While the University is postponing the sale there are plans to revisit it later this year.
In Friday’s broadcast email, University Relations emphasized the University is not filing for financial exigency, or bankruptcy, but is still exploring contingency plans in response to the state’s revenue shortfall and potential budget cuts to higher education.
In the Wednesday statement from University Media Relations Director Ernie Ballard on behalf of LSU President F. King Alexander, the University announced the plans for possible bankruptcy proceedings.
“Based on the current status of the budget debate, we have decided to begin contingency planning for exigency as many of our campuses may be impacted, as well as other campuses across the state. We know the worst-case scenario, we know the timeframe, and we know what’s at stake. We are optimistic that solutions to mitigate the devastation these budget cuts promise are forthcoming from our state legislators; however, we owe it to our students, faculty and staff to be fully prepared for every possible outcome,” Wednesday’s statement read.
Today’s broadcast email, however, reads the University is not filing for financial exigency, but is exploring contingency plans.
The University Relations statement reads, “Contrary to inaccurate media reports, LSU has not begun the process of filing for financial exigency, but we do continue to explore a wide range of contingency plans in light of the state’s $1.6 billion shortfall. In light of recent events, LSU has decided to postpone the issuance of Series 2015 Auxiliary Revenue and Refunding Bonds in the amount of $114.5 million. Under the current circumstances and due to the continued unpredictably of our state budget, we believe this is the responsible thing to do, and we will reevaluate the offering once the state’s financial picture becomes clearer.”