December 8 1997

ARTICLE TOOLS

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An unnamed longtime backer of Liberty University has paid off 1,600 individual bondholders who had the power to foreclose the Lynchburg, Virginia, school founded by Jerry Falwell.

In a settlement concluded September 24, bondholders received $27 million that Liberty had failed to pay back on time for 1982 and 1989 bond sales through Falwell's television show, the Old Time Gospel Hour. Bondholders received 83.5 percent of their original investments.

"Under the circumstances it was the best we could do," says Bob Newell of Seffner, Florida. "We would have liked to have received all our money—even all our principal—but it's time to get out and not prolong it. Most of us are old folks who really need the money."

Newell, 65, had been on a six-member bondholders' negotiating committee (CT, Dec. 9, 1996, p. 66) that had been sued earlier by some bondholders for refusing to accept a 50 percent buyout. Only a dozen of the 1,600 bondholders expressed opposition to this settlement.

The agreement clears up all claims of individual bondholders against the school. The donor negotiated directly with the bondholders' committees anonymously. Liberty had no role in the discussions.

The same individual had purchased $3.5 million worth of bonds at 100 percent face value in March. But some bondholders had received no money since November 1996, when Liberty made an overdue $1.1 million payment to stave off foreclosure by the bondholders, who held first and second liens on the campus.

"I didn't expect to see such a payout," says Chuck Graham, a 69-year-old bondholder from Belleville, Illinois, who invested $50,000 in 1989. "I'd call it a miracle."

School spokesperson Mark DeMoss declined to identify the donor other than to say he is a Christian ...