A report from a national bond-rating agency says Pacific Lutheran University could be in default of a $54 million bond agreement if it fails to improve its stash of readily available funds.
But the university’s president told community members and PLU backers in an online statement posted Tuesday that the university’s financial status is “fine” and that the school is not selling its KPLU public radio station to stem a fiscal crisis.
In an open letter to the PLU community on the university’s website, Pacific Lutheran University President Tom Krise denied that the school’s finances were motivating the $8 million sale of KPLU to Seattle’s KUOW public radio station. That sale was announced earlier this month.
The proposed sale has stirred protests among KPLU backers and listeners who complained the deal will reduce the quality and variety of public radio offerings in the Puget Sound area.
Meanwhile, a report from the Standard & Poor’s rating service in September warned that the school had failed to meet bond agreements to keep enough readily available funds on hand.
In that report, analyst Margaret McNamara wrote that the service had downgraded from BBB to BBB- the rating for bond issues used to finance new facilities at PLU.
“The downgrade reflects our view of PLU’s weakened overall financial profile,” McNamara wrote, “characterized by continued operating deficits on a generally accepted accounting principle basis as well as a decrease in financial resource ratios, particularly expendable resources relative to debt.”
PLU spokeswoman Donna Gibbs on Wednesday said the university’s operating results generated a surplus in the past year and that total enrollment is above expectations, and graduate student enrollment is at a historic high. The university’s debt per full-time student is $16,998 versus a median of $22,132 among BBB-rated small private institutions. Among small private universities in Washington, the debt per student levels run from $18,921 to $39,242, she said.
S&P noted that if the university does not improve its available liquid assets to a level dictated in the bond covenants, the university would be in technical default on $54 million in 2006 bonds. The university did not meet those liquidity requirements last year, and may not meet them this year, wrote McNamara.
Gibbs said the university has applied for a waiver of those bond liquidity requirements while at the same time improving its “unrestricted resources” by 46 percent to $21.4 million.
According to the S&P report, if the university doesn’t obtain a waiver of those requirements from the bond insurer, the whole amount owing on the bonds could become due at once.
The university, according to the S&P report, has identified resources to meet those demands if necessary. The university on Wednesday did not elaborate on what those resources were.
Gibbs said the $7 million in cash and $1 million in sponsor support from the sale would not be used to pay off the debt. That money, she said, is earmarked to be added to the university’s endowment fund.
The reason for the sale went beyond any financial considerations, said Krise in his online statement.
Referring to the deal, Krise wrote that the decision was “based on careful analysis of the future of radio and a concern about how best to sustain public media in the region for as long as possible.”
Krise said combining the two stations under one ownership would reduce operating costs, eliminate expenses for duplicate programing and allow the merged operations to raise more funding from the public.
Under the sale plan, KUOW would continue to operate the two stations. One, KPLU, would be full-time jazz and other music. The other, KUOW, would be news-oriented. The combination must be approved by the Federal Communications Commission. That process is expected to take three to six months.
Meanwhile, KPLU’s 36 full-time and 15 part-time staffers will continue doing their normal jobs.
John Gillie: 253-597-8663
Staff writer Kathleen Cooper contributed to this report.