New England Private School Avoids Closure
McShane Group was retained by a national lender having an 8-figure exposure to a private college in New England. A forbearance agreement was expiring and the lender had to decide whether to fund the school’s upcoming summer cash operating deficit. Refusing to fund would have most likely caused the school to close, with serious ramifications to the lender. McShane’s immediate focus was to determine the weekly amounts of additional funding the college would require to get through the summer. The second task was to project the school’s cash operating performance through the conclusion of the spring semester. Initial projections showed a significant cash operating loss, causing the lender to insist upon the implementation of immediate corrective actions. A new forbearance agreement was executed, using McShane’s detailed forecast as a tracking tool.
Jim Huitt, McShane Group pricipal, has completed five engagements involving private colleges and universities with 8-figure exposures to national lenders. In the other four engagements described below, Jim was retained by the college or university to asses a troubled situation and design a turnaround plan.
Liberty University, a Christian oriented university in Lynchburg, Virginia, with enrollment (at the time) of about 5,000. Liberty was an audit client of Coopers & Lybrand (now Price Waterhouse Coopers) where Jim Huitt managed a statewide consulting practice. He led a team of consultants and attorneys that successfully restructured debt of $85 million owed to a range of creditors and advised the university on cost reductions.
Hood College, a private women’s college in Frederick, Maryland with enrollment of approximately 1,300 students. Jim advised the college on a turnaround strategy that included cost reductions, sale of assets (primarily land not needed), enhanced student recruitment, court ordered amendments to endowment documents and a move to co-ed admissions. Additionally, he assisted with the negotiation of forbearance agreements with the college’s lenders and ultimately a restructuring of that debt.
Jacksonville University, a private university in Jacksonville, Florida, with enrollment of about 2,000. Jim and McShane Group advised the University on cost reductions, budgeting, sale of excess assets and financial forecasting. Jim Huitt attended monthly Board of Trustee meetings and monthly meetings with the university’s lenders, including negotiating a new $8 million line of credit and ultimately, a debt restructuring.
Charles Drew University, a private medical and healthcare university in Los Angeles. Jim and McShane Group were retained as turnaround and workout advisors at the suggestion of a major regional bank that had provided a credit enhancing letter of credit to CDU’s bondholders. The engagement included financial modeling, a top to bottom review of operations and the development of a turnaround plan.
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