Portrait of a bankruptcy
Morris Brown College is mired in millions of debt. Last August, the school filed for Chapter 11 bankruptcy protection. Here is a summary of what and who they owe.
Valstone Partners — $16.7 million
AME Connectional Church — $5 million
U.S. Department of Education — $1.153 million
Various mechanics liens — $600,000
Current employees — $480,000
Ga. Department of Revenue — $100,000
Internal Revenue Service — $51,000
Unsecured creditors — $10 million
Source: Morris Brown College
Morris Brown College has submitted a $20 million plan to the courts that would allow them to sell off some of their property, settle mounting debt and keep most of the campus intact, as they continue to seek re-accreditation.
The deal comes less than a month after the college, which filed for bankruptcy protection last summer flirted with a $10 million proposal from the city of Atlanta.
But in papers filed last Friday in bankruptcy court and obtained by The Atlanta Journal-Constitution, the college’s board of trustees thinks they have found something better for the school mired in $35 million in debt with no steady cash-flow.
FD LLC, which is listed in court documents as the buyer, is offering a deal that on its face doubles what the city was offering. Part of FD’s holdings is in Family Dollar, a chain of discount stores.
Of that $20 million offer, $5 million would be a donation to the school to be used post-bankruptcy.
Morris Brown officials would use $7.5 million to pay off its creditors.
The final $7.5 million would be paid directly to bond holders who control some of the properties FD plans to purchase.
If the deal goes through, FD LLC would buy Middleton Twin Towers dormitory; the adjacent parking lot located between Mitchell Street and Martin Luther King Jr. Drive; Jordan Hall; and a previously foreclosed portion of Herndon Stadium.
“I feel very good about how we are moving,” said William “Sonny” Walker, vice chairman of the Morris Brown Board of Trustees, who said he has been directed by the board not to elaborate on the deal. Calls to Williams and school president Stanley Pritchett were not returned Friday and Monday.
Anne Aaronson, a Philadelphia-based attorney who has been serving as a de-facto spokesperson for the school, said the deal, “means that Morris Brown will be able to get accredited and survive.”
Calls to FD agents were not returned, but Aaronson said the company planned on putting hotels and restaurants on the property, which she said would fall in line with the city’s plans to redevelop the area around the new Falcons stadium.
The 37-acre campus straddles MLK, starting a block west of Northside Drive and the proposed stadium.
And along with buying portions of Herndon Stadium, which was built for the 1996 Olympics, they plan to renovate the facility and lease it out to a professional soccer team.
The current deal would still have to be approved by the courts. Aaronson said the school is due in court on Aug. 1 to defend the proposal and set procedures for creditors to vote on the plan.
But Atlanta Mayor Kasim Reed is skeptical about the structure of the deal.
Reed said aside from securing Morris Brown’s future, his original deal would have helped the city’s efforts to revitalize the area around the Martin Luther King Jr. Drive corridor.
“The city’s interest all along was in securing a stronger, healthier future for Morris Brown College,” Reed said. “If they believe they have a better path, we support the path they think is in their best interest. But we continue to believe that the package the city put forth, which would have eliminated their debt, given them a smaller footprint, given them a chance to repurchase their assets and assured the city’s support in securing their accreditation, was the better alternative.”
Founded in 1881 by members of the African Methodist Episcopal Church, today Morris Brown is a shell of its former self.
At least two former college administrators, Dolores Cross, president from 1998 to 2002 and former financial aid director Parvesh Singh pleaded guilty to embezzling federal student aid money to try to save the school from financial ruin. They were not accused of trying to enrich themselves but of redirecting the aid from student accounts to operating expenses.
While it once taught nearly 3,000 students, only 35 attend now. The campus has 16 buildings, but only uses four. Buildings are boarded up. The football stadium is padlocked. The water was shut off a couple of years ago when the college couldn’t pay its bills and faculty members have gone months without seeing a paycheck.
Creditors holding $13 million in bonds secured by Morris Brown were days away from foreclosing on parts of the campus last summer when the trustees filed for bankruptcy protection.
In 2002, the financial and academic instability cost the school its accreditation with the Southern Association of Colleges and Schools, which cited gross financial mismanagement. The school is now seeking accreditation from the Transnational Association of Christian Colleges and Schools.
Reed’s proposal would have called for buying all of the school’s property tied up in bankruptcy, while allowing the college to rent the five acres of it. It would have also paid the school’s creditors; given the African Methodist Episcopal Church $1 million in cash; and paid $480,000 in back pay to faculty.
Among the reasons Morris Brown rejected a nearly $10 million offer in taxpayer money from Atlanta Mayor Kasim Reed was because, while it covered the school’s debt’s it didn’t provide any operational funds, which they felt didn’t help their accreditation efforts with TRACS.
The school also objected to having to pay rent on the five acres of school that would have remained in their possession.
After Morris Brown turned it down, Reed said he feared that the area would end up looking “like a swap meet,” filled with liquor stores, payday loan shops and cheap retailers.
