State Treasurer Young Boozer said this week that Birmingham-Southern College has not fixed a key shortcoming that he cited in his decision to deny the college’s application for a $30 million state loan in October.

In a dispute that has gone on publicly for months, Birmingham-Southern and the state treasurer give different accounts of their discussions about the proposed loan and what the college can or has offered in collateral.

Boozer said Birmingham-Southern has still not shown that it can provide the state a first secured position on its collateral assets, including the 192-acre campus.

The college disputes that and maintains that it has provided assurance of adequate collateral and points to a letter from its main creditor, ServisFirst Bank.

Boozer said the letter, dated Dec. 6, is “highly conditional” and does not provide the assurances that the college claims.

Boozer said his position to deny the application has not changed and that Birmingham-Southern would need to submit a new application and more financial information to be considered again. The college said it is willing to do that.

Birmingham-Southern, a private liberal arts college, is seeking the state assistance as a bridge to keep its doors open while it raises private funds. Birmingham-Southern said its goal is to raise $150 million to $200 million that would fund a new endowment to support the college’s operations. Birmingham-Southern said it has about $46 million in pledges so far.

Boozer spent a career in banking before entering government service and has been elected state treasurer three times, in 2010, 2014, and 2022.

Last year, the Legislature created the Distressed Institutions of Higher Education loan program last year in response to Birmingham-Southern’s request for $30 million in state funds. The legislation put the program under the authority of the state treasurer.

Boozer, in his denial of the application back in October, said Birmingham-Southern failed to meet the minimum requirements set in the law, including a first position on the college’s collateral assets to back the loan.

Birmingham-Southern owes ServisFirst Bank $16.5 million, and the bank holds the college’s collateral, including the campus.

On Dec. 8, the college sent Boozer a proposal and said the bank had agreed to restructure its loan to allow the state to have a first lien on the collateral. The college included a Dec. 6 letter from ServisFirst Executive vice president and commercial sales manager Paul Schabacker to Birmingham-Southern President Daniel Coleman.

The letter says the bank is willing to release its lien on all assets securing its loan to Birmingham-Southern “provided the bank receives adequate substitute collateral from other sources of a nature and amount that is acceptable to the Credit Committee of the Bank and the participants in our loan group.”

The letter goes on to say it is a “non-binding expression of willingness.”

Birmingham-Southern, in its Dec. 8 email to Boozer, wrote: “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.” (The school included the bold type.)

But Boozer said he does not have confidence the letter means the state can receive the required first position on Birmingham-Southern’s collateral.

“I do not share your opinion that the highly conditional release of all collateral from ServisFirst Bank will address the collateral issue,” Boozer wrote in a Dec. 13 response to Coleman.

Boozer said he requested but has not received any detailed information about any acceptable additional or alternative collateral assets that the college can offer.

Birmingham-Southern said it could not disclose the substitute collateral that it could offer the bank to allow it to release its lien on the campus.

“While the details of the loan application to the state are public, we are not at liberty to disclose the details of a pending negotiation with a private entity,” Virginia Loftin, Birmingham-Southern’s vice president for advancement and communications, said in an email.

Schabacker told AL.com that ServisFirst would not comment about its business dealings with its clients.

Boozer said the Dec. 8 email did not provide any documentation that supports the assertion that Birmingham-Southern has met the requirements to provide the collateral to back a $30 million loan.

“I remain willing to view such documentation, including sufficient available collateral of a nature and amount that is acceptable and a solid financial restructuring plan to provide repayment of a loan, if provided to me,” Boozer wrote.

On Dec. 22, Coleman and Birmingham-Southern Board of Trustees Chair Rev. Keith Thompson wrote to Boozer to reassert the college’s position that it has offered adequate collateral. They said that includes the main part of the campus, which has a liquidation value of $22 million, the Hilltop Apartments on the campus, with an appraised value of $9.45 million, the headquarters of the Consolidated Pipe and Supply Co., which is on the campus and has an appraised value of $2.46 million, and a life insurance policy valued at about $1 million.

“In total, we are offering the State a first secured interest in $35 million of assets — an amount that is more than adequate to cover a $30 million loan,” Coleman and Thompson wrote. “In other words, our application meets the minimum statutory qualifications for receiving credit from the Alabama Distressed Institutions of Higher Education Revolving Loan Program.”

Boozer said he does not have confidence that the assets carry as much value as collateral as the college says.

“The facts are that the $35 million in total proposed collateral is a combination of dated market and liquidation values of the various assets proposed by the College as security for the requested loan,” Boozer said in an email Thursday. “In the event of liquidation, it is improbable that these properties, as part of an abandoned college campus with extremely limited alternative use, would offer sufficient value to adequately secure a loan of $30 million.”

Birmingham-Southern disputed Boozer’s characterization of the value of the assets. The college said it is based on a November 2022 appraisal. The college said the liquidation value of the campus, $22 million, is $32 million below its appraised value and takes into account the complexities of selling an empty campus.

Boozer said Birmingham-Southern has not submitted an adequate financial restructuring plan that shows its ability to repay the loan, as required by the law. He said the college has not provided requested documents, including current annual audited and interim financial statements. He said the restructuring plan submitted with the loan application has not proved credible because, for example it assumed the college would have reached a goal of $100 million in pledges for its new endowment by January 2024.

Birmingham-Southern said Boozer’s denial of the loan and what the college claims was his unnecessary delays in making that decision hurt its fundraising and its ability to recruit and retain students. As for the lack of financial documents, the college said its auditing firm had to rewrite portions of its latest audit because of the denial of the loan and it is awaiting the audit.

After Boozer denied the loan in October, 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, after saying in court that the law gave the treasurer the discretion to deny the loan.

State Sen. Jabo Waggoner, R-Vestavia Hills, who sponsored the bill creating the Distressed Institutions of Higher Education loan program, said he and Rep. David Faulkner, R-Mountain Brook, met with Boozer in December and left the meeting encouraged about the prospects for the loan.

“We had a very positive meeting and we left there with some hope,” Waggoner said.

Asked if the Legislature might revisit the law to make it more likely that Birmingham-Southern could get the loan, Waggoner said that was possible.

“I would not rule that out, but nobody has talked about it yet,” Waggoner said.

AL.com first reported in December 2022 that Birmingham-Southern was in financial distress and was in danger of closing. Birmingham-Southern formed from a 1918 merger of Southern University, dating to 1856, and Birmingham College, dating to 1898, both founded by the Methodist Church. The college has about 700 students and about 290 employees.

Birmingham-Southern said its financial problems started with a building program in the mid-2000s that drew heavily from the college’s endowment and put the college in significant debt.

In late November, the Birmingham City Council approved $5 million in loans to the Birmingham-Southern.

Coleman called that a step in the right direction and said Birmingham-Southern should be able to open in the fall of 2024. Coleman said the college would also seek money from the Jefferson County Commission.

Birmingham-Southern’s plan last year was to seek $5 million from the city and $2.5 million from the county along with the $30 million from the state.

Read more: President says Birmingham-Southern College more ‘likely than not’ will return next fall with city funding

Boozer said Birmingham-Southern will need to submit a new application to be considered again.

“We are waiting on them to send us financial information,” Boozer said. “It would seem to me since that has been denied, they would have to make another application. And I would expect they would do that once they have this information together. And we’d be more than happy to take a look at it.”

Birmingham-Southern said it meets the qualifications as outlined in the enabling legislation for the loan program and will continue to make its case.

For full coverage of Birmingham-Southern College, click here.