See update at the bottom of the post to see how F. King Alexander may have placed LSU in danger of an SEC investigation as well.
Yesterday, we called for the LSU Board of Supervisors to fire LSU President F. King Alexander. We alleged that his remarks threatening bankruptcy were either an admission of incompetence or he was lying.
Today, a couple of press releases hit that only strengthen the argument that LSU needs a new president. The first one is from Treasurer John Kennedy.
National Investors Pull Out of LSU Bond DealTreasurer Kennedy: “This is an unwelcome development in Louisiana’s higher education funding crisis”
BATON ROUGE, LA – National investors this morning pulled out of a large portion of a $114 million bond deal for Louisiana State University amid concerns over budget instability and state support for LSU and other Louisiana colleges and universities, State Treasurer John Kennedy announced Friday.“We’re trying to sort out the facts. This is obviously not a welcome development,” said Treasurer Kennedy. “It could have ramifications for other universities in Louisiana and for the state’s overall bond rating, and it could impact the interest rate on future state bond issues, including an upcoming $300 million state general obligation bond issue.”LSU on Tuesday issued $114 million in revenue and refunding bonds to generate money and to save taxpayer dollars. Proceeds from the bond sale would have funded a Family Housing Complex, residence halls and a Student Health Center and also would have saved interest on existing debt. The bonds were priced on Tuesday.Earlier this week, Moody’s Investors Services lowered LSU’s credit outlook from positive to stable because of limited prospects for sustained revenue growth. Moody’s action puts LSU one step away from a negative outlook, which could result in a downgrade for the university’s credit rating.“Higher education in Louisiana has been socked with back-to-back years of reduced funding,” said Treasurer Kennedy. “Investors are sounding the alarm bell. We need to listen.”
Contrary to inaccurate media reports, LSU has not begun the process of filing for financial exigency, but we do continue to explore a wide range of contingency plans in light of the state’s $1.6 billion shortfall. In light of recent events, LSU has decided to postpone the issuance of Series 2015 Auxiliary Revenue and Refunding Bonds in the amount of $114.5 million.Under the current circumstances and due to the continued unpredictably of our state budget, we believe this is the responsible thing to do, and we will reevaluate the offering once the state’s financial picture becomes clearer.We remain hopeful that the Legislature will develop solutions to protect funding for LSU and higher education in Louisiana, but we owe it to our students, faculty and staff to prepare for every possible outcome, as any responsible fiscal manager would do.
Louisiana’s flagship university began putting together the paperwork for declaring financial exigency this week when the Legislature appeared to make little progress on finding a state budget solution, according to F. King Alexander, president and chancellor of LSU.
“We don’t say that to scare people,” he said. “Basically, it is how we are going to survive.”
There are only two explanations for this. Julia O’Donoghue, the Times-Picayune reporterette, is making this up, but I find that highly unlikely. The most likely explanation is that LSU’s public relations department is engaging in CYA because F. King Alexander devalued his product in order to get more money from the state.
F. King Alexander’s devaluing of the LSU product has already led to financial consequences. In order to maintain the credibility of LSU, the Board of Supervisors needs to fire F. King Alexander.
UPDATE: Here’s another reason why the Board of Supervisors should part ways with Alexander, according to Bloomberg he’s opened up the school to a possible Securities and Exchange Commission investigation over this now pulled bond issue.
Investors who bought $114 million of debt sold by Louisiana State University on Wednesday were warned about the state’s fiscal struggles. What they weren’t explicitly told in bond offering documents was that the school was considering filing for exigency.
That’s a no-no under SEC rules. As Bloomberg noted in a follow up article, the SEC is cracking down on government borrowers who fail to make proper disclosures.