Birmingham-Southern College has told State Treasurer Young Boozer it can offer the state first-claim position on its collateral assets, which would fix one of the deficiencies Boozer cited in his decision to deny the college’s request for a $30 million loan in state funds.

Birmingham-Southern President Daniel Coleman and the college’s board chair sent a letter to Boozer on Friday with its latest proposal in seeking the loan, which the private college is pursuing to help keep its doors open.

Boozer said Friday afternoon he would review the proposal.

Boozer turned down the Birmingham-Southern request in October, saying the college did not meet the qualifications to receive a loan under the Distressed Institutions of Higher Education program, which the Legislature created earlier this year in response to Birmingham-Southern’s request for state funds. The legislation put the state treasurer in charge of the loan program and gave him discretion on whether to approve a loan.

The law requires the college to provide a first security interest in its collateral assets, as well as a financial restructuring plan to provide for repaying the loan.

Boozer, in his Oct. 13 letter denying the application, said Birmingham-Southern could not provide first-security interest in its collateral assets, which include the 192-acre campus. Boozer also said the college’s financial restructuring plan did not adequately provide for repayment of the loan. The college also disputes that.

Boozer, in an interview on Thursday with AL.com, explained his reasons in reaching the conclusions stated in his Oct. 13 letter turning down the loan application.

Among those reasons, Boozer said, are the college’s existing debt to ServisFirst Bank and its bond debt. ServisFirst bank has first security interest in the college’s collateral assets. Student tuition revenues are pledged as collateral for the bond debt.

In response to questions from AL.com on Friday, Birmingham-Southern said it offered the state first-security position in writing on two previous occasions and again in Friday’s proposal, which the college said included a letter from ServisFirst Bank.

Birmingham-Southern said it owes ServisFirst Bank $16.5 million. The bond debt is $8.5 million, the college said.

‘The College has offered the State a first secured position in collateral that exceeds several times the amount of the proposed $30 million loan, including its 192-acre campus in west Birmingham and U.S. Treasury securities,” Birmingham-Southern said in an email. “First secured position was offered in writing on May 12, 2023, August 24, 2023, and again on December 8, 2023.

The college said those offers were made verbally in two meetings in Boozer’s office on Nov. 30, one with the treasurer and his staff and three representatives of the Birmingham-Southern Board of Trustees, and the other with the treasurer and his staff and two members of the Alabama Legislature.

Boozer noted that the liquidity value of Birmingham-Southern’s collateral assets is $22 million. Boozer said that was not enough to provide security on the ServisFirst debt plus additional debt that would come with a loan from the state.

Birmingham-Southern mentions the $22 million liquidity figure but also includes additional collateral values in its letter to Boozer on Friday, according to an excerpt sent to AL.com (the bold print is from the college). The letter also mentions the Nov. 30 meetings:

“We understand from conversations with these legislators that the release of all collateral from ServisFirst Bank will address the collateral issue raised in your October 13, 2023, letter to the College.

“This release will enable the College to provide the State with a first security interest in its collateral assets, a minimum requirement in the Act that established the Distressed Institutions of Higher Learning Revolving Loan Program.

“To this end, we have attached a letter from ServisFirst Bank confirming their willingness to release all assets they have as collateral.

“In addition, we have attached the most recent appraisal of the main campus as well as those for the 146-unit Hilltop Apartments and the nearly 15,000-square-foot Consolidated Pipe and Supply Company corporate headquarters, both owned by the College. This information was previously provided in writing to the Treasurer’s office on May 12, 2023, and August 24, 2023.

“The most conservative numbers for the main campus ($22 million liquidity value, $55 million to $75 million in appraised value), the Hilltop Apartments ($9.45 million), and the appraised value of the Consolidated Pipe building ($2.46 million) total approximately $34 million. In addition, BSC can pledge a life insurance policy that will increase the collateral to $35 million.

“In summary, the College can offer first security interest in all its collateral assets, giving the state first priority interest in Birmingham-Southern’s entire campus, a campus which provides more than adequate security for a $30 million loan.”

Two weeks ago, the Birmingham City Council approved $5 million in loans to Birmingham-Southern. Coleman called that a step in the right direction and said the college should be able to open in the fall of 2024. Coleman said the college would also seek money from the Jefferson County Commission.

AL.com first reported in December 2022 that Birmingham-Southern was in financial distress and was in danger of closing. The college initially sought a state grant, as well as money from the Birmingham City Council and the Jefferson County Commission, funding the college said would be a bridge until it could raise money for its endowment. The Legislature approved the Distressed Institutions of Higher Education Loan Program in response to Birmingham-Southern’s requests.

After Boozer denied the loan, Birmingham-Southern filed a lawsuit disputing Boozer’s claims that it failed to meet the minimum qualifications and said Boozer had exceeded his authority and undermined the intent of the Legislature when he turned down the loan application.

Montgomery County Circuit Judge James Anderson granted the state’s request to dismiss the lawsuit, finding that the Legislature gave Boozer the discretion to deny the loan.

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