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What was at first seen as a financial lifeline, is now being criticized as anything but, by supporters of St. Augustine’s University (SAU), as the troubled private historically Black institution continues to battle back to solvency.
At issue are the terms of a $7 million loan SAU officials secured last May from a Durham-based venture capital group, Gothic Ventures, which, according to critics, reportedly required SAU to pay a 24 percent interest rate and 2 percent loan management fee, in addition to a $75,000 “due diligence and documentation fee.”
And what did SAU have to provide as collateral for the loan? Its main Raleigh campus, and at least 40 other pieces of property on more than 11 acres around the SAU campus. If the university defaults on the loan, which comes due on June 30, 2025, those properties will be forfeited to Gothic Ventures.
SAU reportedly has the right to extend the maturity date of the loan until December 31, 2025, and can secure up to $30 million in total.
To say that the terms of the $7 million loan outraged SAU supporters would be an understatement.
Several SAU alumni, along with civil rights activists from ONE Wake, Durham CAN, the Center for Responsible Lending, Save SAU Coalition and members of the clergy, held a press conference in downtown Raleigh on Nov. 20th to protest the loan agreement between the university and Gothic Ventures.
Those SAU supporters demanded that Gothic Ventures reduce the 24 percent high interest rate to just 9 percent or waive the pre-payment penalty so that another lender can take over the loan with more favorable terms. “Saint Augustine’s University’s continued existence rides on achieving an equitable resolution to financial challenges and problems facing the historically Black university that could jeopardize its ability to serve current and future students,” a news release from the protesting supporters stated.
Kip Johnson, founder of Gothic Ventures, said his company reached out to SAU once their financial problems became well known, and officials there responded.
“The interest rate was based on the financial challenges facing the university which included its most recent audit report indicating concerns about the university’s ability to continue operating as a going concern, the lack of audited financial statements for the last several years, historical losses because revenues exceeded expenses [sic], significant outstanding debt, IRS liens on the university’s property, and the suspension of the university’s accreditation,” Johnson wrote in an email to WRAL-TV.
“While we hoped that the government or a foundation or a bank would provide the funds necessary to keep the university open, that did not happen,” Johnson added.
According to published reports, $3 million of the $7 million loan went to satisfying past due and upcoming payroll taxes; almost $2 million to the U.S. Dept. of Education; and the rest to pay off student refunds, several outstanding audits, property insurance and appraisals, among other expenses.
With an upcoming meeting about maintaining its accreditation scheduled for next month, SAU has reportedly instituted deep cuts to its operation to cut expenses by $17 million, including eliminating 67 staff positions, ending under-enrolled programs, and “settling outstanding balances with vendors,” according to a press release.
“While we recognize the seriousness of these financial adjustments, these decisions are essential for safeguarding the future of Saint Augustine’s University and the students we serve,” the release continued.
