Worries arise that loan to Saint Augustine’s University could threaten school’s future

By Cindy Bae

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    RALEIGH, North Carolina (WTVD) — A group of leaders are worried about a $7 million loan given to Saint Augustine’s University

The group includes religious leaders, social justice advocates and SAU alumni. Together, they spent Wednesday raising awareness about the loan and pushing for a solution to the school’s financial challenges.

“Frustrated about all of these things that are going on the seem out of our control. But there are things we should have control,” alum Harold Mallette said explaining his feelings about the situation.

The Raleigh university remains millions of dollars in debt. Earlier this year, they took out the loan with Gothic Ventures LLP to help keep the university afloat. The $7 million loan has an interest rate of 24% plus a 2% loan management fee. The university was also charged a $75,000 due diligence and documentation fee.

To get the loan, Saint Augustine’s University put up much of the university’s main campus and off-campus properties as collateral.

“Saint Augustine University is already financially stressed, struggling with rising operating calls, declining enrollment and reduced government funding,” Jaylon Herbin with the Center for Responsible Lending said. “This loan exacerbates its physical strength. The signs are not only difficult to meet in the short term, but also threatening the university’s long term viability. If these terms are not modified or eliminated, the likely outcome is grim.”

“We are concerned about the partnership between Gothic Ventures and Saint Augustine University because if for any reasons Saint Augustine is unable to repay Gothic ventures, the land will be lost and the university as we know it will cease to be,” alum Bishop Clarence Laney said.

Gothic Ventures tells ABC11 that the interest rate given was based on the financial challenges facing the university, including a recent audit, historical revenue losses and outstanding debt.

“Our intention from the beginning has been to aid this historic HBCU in its time of great need when no other lender would do so,” Gothic Ventures said in a statement. “If St. Augustine’s University wants to discuss changing the loan terms in connection with an earlier loan payoff or the sale of our loan to another lender, we would absolutely be willing to sit down and discuss those terms with the University and its Board of Trustees,” the lender said in a statement.

Saint Augustine’s University has had a tumultuous semester — including a delayed opening, missed payroll checks, accreditation snags, merger talks, lawsuits, suspensions, homecoming cancellation and more.

Full statement from Gothic Ventures: Gothic has provided debt capital to numerous organizations over the last 10 years and I have a long-standing personal interest in the opportunities that education can provide. We saw numerous press reports and stories about Saint Augustine’s University and its financial challenges. While we hoped that the government or a foundation or a bank would provide the funds necessary to keep the University open, that did not happen. When the University announced that it needed a significant cash infusion to be able to operate for the fall semester, I reached out to the University to see if the University would be interested in discussing a potential loan transaction. When the University indicated that it did want to discuss a potential loan transaction, we held a series of meetings with representatives of the University, its Board and its external legal counsel to discuss the terms of the loan. During these discussions, we made a number of concessions to address specific concerns of the University. The interest rate was based on the financial challenges facing the University which included its most recent audit report indicating concerns about the University’s ability to continue operating as a going concern, the lack of audited financial statements for the last several years, historical losses because revenues exceeded expenses, significant outstanding debt, IRS liens on the University’s property, and the suspension of the University’s accreditation. Our default terms are standard for loans of this size and type.

We understand that an event occurred today where various parties made statements concerning our loan to the University. A lender does not discuss the terms of a loan agreement with anyone other than the borrower. If St. Augustine’s University wants to discuss changing the loan terms in connection with an earlier loan payoff or the sale of our loan to another lender, we would absolutely be willing to sit down and discuss those terms with the University and its Board of Trustees. Our intention from the beginning has been to aid this historic HBCU in its time of great need when no other lender would do so.

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