Averett gets OK to proceed with North Campus sale

Financially strapped Averett University has received three requested consents from the majority of holders of about $13.3 million in bonds, including one which will allow the private university in Danville to move forward with the proposed $18.15 million sale and leaseback deal of its E. Stuart James Grant North Campus.

“Averett University is happy to announce that the bondholders’ vote is now complete, as we have received in excess of the 50% needed to pass,” Averett President Thomas Powell said in a statement Wednesday.

Obtaining the consents is part of the private university’s efforts to weather a financial crisis that first came to light in 2024 when its leaders announced furloughs and other cost-cutting measures.

The picture of the school’s money woes became clearer in March when Averett filed a federal lawsuit alleging that former Averett Chief Financial Officer Donald Aungst and Arizona-based Global Strategic Investment Solutions had “surreptitiously” drained nearly $20 million from the university’s endowment to cover the university’s budget deficits.

As part of its efforts to find sounder financial footing, Averett announced plans in August for the sale and leaseback deal of its North Campus, located off Mount Cross Road. Before the university could sell the property, however, it needed approval from a majority of bondholders of debt the school took out in 2017 for construction and refinancing of prior financial obligations.

In a consent solicitation statement dated Aug. 11, Averett noted that “regional investors,” including the Danville Regional Foundation, plan to buy the North Campus, which includes the university’s playing fields for football and other sports as well as its indoor athletic complex.

Averett will continue to use the property and will pay rent equal to a 4.5% annual return on the investors’ purchase price, according to the document. The lease will last for 10 years, with an option to extend it for another 10-year period.

“Now that the vote is complete, we can begin the process of closing on the sale/leaseback of the North Campus,” Powell said in Wednesday’s statement. “We look forward to moving ahead in our quest to create a dynamic and more efficient Averett University.”

An Averett spokesperson did not immediately respond to requests for additional information.

In the consent solicitation statement, Averett also asked bondholders to waive “the covenant defaults with respect to the noncompliance by the university with the debt service coverage ratio” and the liquidity covenant. Bondholders were also asked to waive a requirement that an official audited financial report for the 2024 fiscal year be submitted by Dec. 1, 2024.

Averett has never missed a payment on the bonds. However, the university is technically in default due to failing to comply with the debt service coverage ratio and the liquidity covenant, according to a June 27 filing by U.S. Bank Trust, a trustee of Averett’s bonds, posted on the Electronic Municipal Market Access website.

The 2017 agreement requires that Averett maintain a debt service coverage ratio of more than 1.20. For fiscal 2024, Averett’s ratio was -4.46.

On May 30, Averett submitted a draft version of the financial report for fiscal 2024. However, without the agreement by the majority of bondholders to the requested consents, auditors would have to treat the bonds as if they were being accelerated in the final document, even though the bondholders have not asked to accelerate the debt due to noncompliance.

Powell became Averett’s 16th president in May. He replaced David Joyce, who stepped down in April after serving just three months, citing his wife’s health. Tiffany Franks, Averett’s president for 17 years, retired in January.

Averett extended the deadline for the request for consent from the bondholders three times. By the end of September, the university had responses from about 46.1% of the holders of the outstanding bonds, with 99.6% voting in favor of the requests.The deadline for the latest extension was Oct. 7.

On Aug. 6, a judge ordered Averett University to hash out its differences with GSIS and the university’s former chief financial officer through arbitration. GSIS denies the allegations. In August, Francisco E. Mundaca, a Maryland-based attorney representing Aungst, said in a statement that the former Averett CFO may be considering his own court action over the dispute.