Lapis Advisers Pressures University on Technical Default

August 15, 2019 | Hedge Funds, News
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Bethune-Cookman is under fire from hedge fund Lapis Advisers over bond payments

Lapis Advisers and bond trustee U.S. Bancorp are reportedly pressuring the Bethune-Cookman University for a first mortgage on $161 million in school property.

The University has fallen into technical default on $17 million in bonds.

The dispute centers on a forbearance agreement with tenure until December.

The default entitles Lapis – the largest holder of those bonds – to claim early payment on the bonds. But, the firm has not exercised that right.

Meanwhile, Belvin Perry, chairman of the board of trustees, claims the hedge fund has engaged in extortion. “What you’re doing is basically tearing down an institution that is designed to help diamonds and unpolished diamonds in the black community,” says Perry.

Perry Claims Extortion

Bethune-Cookman is based in Daytona Beach, Florida. Civil rights activist Mary Mcleod Bethune founded the school in 1904 with an investment of just $1.50.

Today, the school enrolls roughly 3,700 students. However, falling enrollment has fueled financial difficultires. Bethune-Cooklan has also seen dormitory project surge in costs. This project has fueled a court battle over fraud allegations, according to Bloomberg.

With financial problems mounting, the college triggered the default provison in its bonds by borrowing beyond the limits set in the bond agreement. The college also proceeded to seek $8.5 million from its endowment. According to trustee U.S. Bancorp, this action is tantamount to another default.

Lapis Advisers’ View on the Matter

According to Kjerstin Hatch, the founder and managing principal of Lapis, the college is guilty of a fairly significant default.

“They may think it’s overreaching, they may think its bullying,” she said. “We’re working really hard to try to ensure the future success of this important institution.”

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