Liberty to pay off $189M in bonds early

Documents set redemption date in April

Published March 1, 2023 by Kate Andrews

Liberty University plans to pay off more than $189 million in taxable bonds next month, according to paperwork filed Wednesday by the Bank of New York Mellon Trust Co. NA. The prices will be set March 31, which will include accrued interest.

Liberty issued a $100 million bond in 2012 with a 5.1% interest rate, and in 2019, it issued two more bonds, with the principal amounts of $86 million and $3,745,000. All three bonds will be redeemed April 5, according to the documents, which were posted Wednesday on Liberty’s financial disclosure website. Davenport & Co. LLC, the Lynchburg-based private Christian university’s financial adviser, will determine the “make-whole” prices of the bonds, which is equal to 100% of the principal amounts, or the sum of the present values of remaining principal and interest payments on any bonds being paid off.

The 2012 bond, issued to fund construction projects, becomes mature on March 1, 2042. The 2019 bonds of $3.7 million and $86 million, which replaced an existing bond debt from 2010 at lower interest rates of 2.246% and 3.338%, are due March 1, 2024, and March 1, 2034, respectively. The BNY/Mellon Trust Co. is trustee of the three bonds, which were estimated at a worth of $193.41 million as of June 30, 2022, according to Liberty’s financial audit report for fiscal year 2022.

Liberty’s endowment was at $2.169 billion in fiscal year 2022, according to its 2022 financial report, and its total assets without donor restrictions were just below $3.5 billion. The University of Virginia, which reported a $9.8 billion endowment in fiscal year 2022, tops the state’s list of college endowment funds.

Founded by Jerry Falwell Sr. in 1971 as Lynchburg Baptist College, Liberty has grown into an online-learning juggernaut, with 95,148 students enrolled in 2021, most of whom study remotely, according to the university. However, the school has been subject to multiple controversies since 2020, including former chancellor and president Jerry Falwell Jr.’s fall from grace in August 2020. He was forced to resign after a series of personal scandals, including allegations that he had knowledge of an affair between his wife and a young man who also was their business partner briefly. Falwell has denied that allegation, but the university sued him for $10 million for breach of contract, a suit that is still active in Lynchburg Circuit Court.

Liberty also was sued by 22 anonymous women — both former students and staff members — who alleged that Liberty “intentionally created a campus environment where sexual assaults and rapes are foreseeably more likely” and discouraged victims from reporting their assaults. In May 2022, 20 of the plaintiffs settled their lawsuits against Liberty. The U.S. Department of Education announced in May 2022 it would investigate the university over claims of Title IX misconduct.

A former employee, John Markley, filed a $20 million lawsuit against Liberty in November 2022, claiming he was fired for being a whistleblower. Liberty also launched a third-party investigation of the university’s finances and real estate dealings during Falwell’s tenure in late 2020, but no report has been publicly released yet.

Interim President Jerry Prevo, the school’s former longtime board chair, plans to step down after this academic year; in August 2022, the university announced it was starting a search for his replacement.

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