Wednesday, August 10, 2011

Final Post For Awhile: Byrnes Settlement Agreement with First Citizens

Greetings all and many thanks to all of those who have participated in the discussion here.  I know that emotions have often run very hot, but I appreciate the contributions and dissenting viewpoints that have been put forth here by others. 

It's only fitting that this blog should wrap up as the bankruptcy saga now comes to a close, although I would argue that the odds of Byrnes surviving even this settlement agreement are not very good.  I think all those at Byrnes, either as parents or employees, should read this closely and be aware of the terms of the settlement and hold the management team accountable for their actions going forward.  While this agreement does get them out of bankruptcy, it opens the door for even more serious trouble in the future.

For anyone who wants to read the filing yourself, go to www.pacer.gov and search under "bankruptcy" and "south carolina" and do a search for case number 11-00538.  Click on "History/documents" and scroll to the bottom and click on the filing labeled "Addendum" filed on August 4th 2011.  There are some charges to use Pacer, but they are negligible and if you use less the $10 worth per 3-month quarter, they waive them entirely, so it should cost nothing to get this document yourself if you'd like to read it.  I suggest that anyone with a vested interest in Byrnes' future give it a good read as it may prove vital in the months and years ahead.  Part of the settlement includes a press release with wording agreed to by both FC and Byrnes, but even so, everyone should read the terms for themselves and consider them in light of Byrnes' past financial history.

So, in a nutshell, here's the settlement agreement:

  • FC retains the full value of their secured claim (~$1.6million)
  • Byrnes will pay $11,000 a month for 1 year
  • After that, they pay $13k a month
  • The loan matures(due in full) by August of 2017, ie. six years
  • If they can pay it in full earlier, Byrnes can have a substantial part of the debt forgiven (for example, if they pay up by 2013, they only owe $1.2 million instead of $1.6mil.
  • If Byrnes defaults again, FC can immediately take possession and sell the property
  • Byrnes waives the right for bankruptcy protection in the future until the FC loan is paid
That's the deal in a nutshell, and FC's attorneys would have been insane to turn down such an offer.  I'm curious to read a transcript of the hearing if one ever gets released, because this deal represents very thin ice for Byrnes and they must have been backed into a corner to agree to such a thing.  Granted, it's better than having the school shut down and sold, but it leaves that as still a very real possibility.  In fact, it's an even greater possibility than before because this deal basically waives all of Byrnes' rights for protection should they have financial troubles in the future!

Nowhere in any court filings have there been any hints as to austerity measures being enacted at the school, but that is exactly what will have to happen if it is to survive (barring the board members all chipping in enough money to pay off the 1.2 million dollar early payoff value).  None of this changes the documented fact that the school was and is hemorrhaging money and carrying a payroll that they don't need and can't afford.  Unless the donors keep chipping in 200-300k per year, there is no way they can make these payments and make payroll.  Lets not forget that the year before the bankruptcy they had to borrow nearly $700,000 just to make payroll and at the time were not even making payments to FC. 

For those who want to see the school survive, here's what I would suggest:
  • Demand a complete upper management change over the next 1-2 years, bringing in a brand new board, headmaster, and financial manager.
  • Demand a grand cost-cutting package that eliminates 200-300k in salaries and possibly more from other areas.  Too much money is frittered away and the school can't afford it.  If the board won't do it, replace them with those who will. 
  • While hiring a dean of academics sounds nice, the school can't afford another salary at a time like this.
  • Demand that free tuition for recruiting athletes be eliminated.  Remember, not only are these kids not generating revenue, but they are incurring extra costs associated with the team that the school is writing off (travel, uniforms, free lunches, etc.)
If the school can't make the hard choices needed, they don't deserve to survive.  I know, they like to use the smoke and mirrors of using next year's money for this year's expenses and claim that their income meets or exceeds expenses every year.  In response to that, everyone should quote what the Bankruptcy judge said when they tried it on him: "So what are we doing here?"

I would again like to thank the readers and contributors to this blog.  I would like to think that together we've brought to light many unpleasant truths that would otherwise remain the domain of rumor and innuendo.  Perhaps now that more of the truth is in the open, steps can be taken to address it.  I'm removing older posts since at this point they are no longer as relevant and we should all be focused on the future.  I am personally not optimistic about their chances of surviving the next couple years given recent economic trends and their lack of future bankruptcy protection; however, since they can't again be in bankruptcy for this particular debt, we can safely say the bankruptcy saga is at an end.  There may be a "Byrnes Defaulted Again and Now They're Closed" saga in the near future, but that is another story for another day. 

Good luck to all in this coming year.