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Distressed Private School in New England Avoids Closure

Last year McShane Group was retained by a national lender having an 8-figure exposure to a private school 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. Our firm's second task was to project the school's cash operating performance through the conclusion of the spring 2007 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. McShane will continue to monitor the school' performance on a periodic basis.

This is the fourth engagement involving private schools with 8-figure exposures to national lenders on which McShane has worked. In each case, the lender has sought advice from our firm on what corrective actions are needed and, within legal guidelines, used us as an influencing force to effect those changes.

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. Jim Huitt 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 Huitt advised the college on a turnaround strategy that included cost reductions, sale of assets (primarily land not needed), enhanced student recruitment and a move to co-ed admissions. Additionally, Jim Huitt 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. 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.