Lambuth Board Votes for Bankruptcy, a Step Toward Turning Campus Over to State

JACKSON, Tenn. (AP) — The Lambuth University Board of Trustees voted Thursday to file for Chapter 11 bankruptcy.
The 168-year-old United Methodist campus officially closed after years of financial difficulties and the loss of its academic accreditation by the Southern Association of Colleges and Schools.
Board Chairman Mike Keeney said in a news release that the school has been trying to sell its assets to settle its debts. But with debts remaining and time running out, the board decided to ask for an expedited bankruptcy plan.
The trustees also voted to accept a proposal from a group of stakeholders to sell the campus for $7.9 million. However, there is not yet a signed letter of agreement, so the purchase is still tentative.

According to letters between Lambuth and the stakeholders group, the school had about $10.4 million in debts as of April 15. Lambuth officials have said the campus was appraised at more than $38 million.
Under the purchase proposal, the city of Jackson, the Madison County Commission, the Jackson Energy Authority and West Tennessee Healthcare would each pay about $2 million, Jackson Mayor Jerry Gist told The Jackson Sun.
The group plans to turn the campus over to the state Board of Regents to create a satellite campus of the University of Memphis that they hope can be open by the beginning of the fall semester.
“We’re hoping that with the offer and the filing, this can be an expeditious process,” Gist said.
State officials have said public money cannot be used to purchase a private university, so the campus has to be given to the state. And Lambuth’s debts have to be paid off first.
However, if the purchase and transfer go through, the legislature has agreed to provide $5 million to aid U of M in first-year operating costs for the 2011-12 academic year. State support would total $11 million over four years, declining each year as student enrollment increases and tuition and fees generate revenue.
Officials hope the Chapter 11 bankruptcy protection can be expedited so that it does not delay or prevent U of M from taking possession of the campus.
Once the bankruptcy petition is filed, Lambuth will be protected from its creditors while remaining in control of its business and assets. But its reorganization plan must be accepted by the majority of its creditors.
According to letters between Lambuth and the stakeholder group, the school’s largest creditor is Radian, to which it owed $4.96 million in principle obligation as of mid-April under a tax-exempt bond issue which provided funding for the campus. About $5.43 million was owed to other creditors.

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