University leaders make a rare concession in ongoing financial negotiations
La Roche University, a private Catholic institution in Pennsylvania, has granted bondholders a mortgage on the college president’s residence as part of a financial agreement aimed at stabilizing its finances. Bloomberg reported that the move comes as the university grapples with declining enrollment and mounting financial pressures.
The provision was included in a recent forbearance agreement between the university and UMB Bank, the trustee for bondholders, according to regulatory filings. Zillow reported that the five-bedroom, three-and-a-half-bathroom house, valued at approximately $682,000, now serves as additional collateral.
La Roche, founded in 1963 by the Congregation of Divine Providence, has faced financial challenges throughout its history. The university has seen a nearly 30% decline in undergraduate enrollment since 2020 and carries about $19 million in outstanding municipal bond debt.
Forbearance agreements allow investors to waive specific defaults, such as missing financial benchmarks, for a set period.
These struggles reflect broader financial difficulties across the higher education sector, where institutions are closing at an alarming rate—approximately one per week—often due to financial collapse and declining student enrollment, Forbes reported. Analysts at S&P Global Ratings noted that such agreements are a growing trend among struggling institutions, signaling distress in the higher education sector. Miguel Laranjeiro, investment director at Aberdeen Investments, stated that the increase in these agreements reflects the risks associated with college debt.
In this case, La Roche anticipated breaking a covenant related to debt service coverage, which would have triggered a default. Brady Butler, a university spokesperson, characterized the agreement as a standard financial strategy used by institutions facing economic challenges.
“As is typical in university bond agreements, the investors hold a lien on certain university-owned assets, including the president’s residence,” Butler said in a statement. “This agreement was reached as part of a cooperative comprehensive plan to maintain the university’s financial stability and ensure that we continue to provide quality education and services to our students.”
UMB Bank indicated in a March 20 filing that it would approve changes to the loan agreement if bondholders agreed.
Bondholders already had a mortgage on the university’s 44-acre campus, appraised at $36.5 million in 2020. However, experts note that selling a college campus can be challenging due to its specialized facilities, making the addition of the president’s home an added layer of security for investors.
The forbearance agreement includes other financial adjustments, such as shortening the repayment period for the debt service reserve fund from 36 months to 12 months if it is used to pay investors.
Despite financial struggles, La Roche has reported positive developments, including increased donations under new leadership in university advancement. The school has also expanded its academic offerings, adding a cybersecurity and forensics major and planning to introduce a sports and entertainment management major in the fall.
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