With $3.6 million from the Harrisburg Parking Authority in December and $1.5 million from Dauphin County a few weeks ago, Harrisburg University of Science & Technology has recently emerged from default on its $60 million bond.
How long it can retain that status, however, remains to be seen. Payments of $1,806,750 are due in March and September, and HU President Eric Darr said today that although the university is working hard to have the ability to make the payment this fall, he doesn’t know whether it will succeed.
HU made the payment this March with the help of $1.5 million from Dauphin County, which, as a guarantor on the bond, must pay up to that amount each year if HU can’t. This was the second year in a row the county made that payment, but even with that help, by late fall of 2013, HU was two payments behind.
That’s where the parking authority deal came in. Back in 2007, the authority paid HU $14,000,600 for seven floors of parking facilities in the HU building. According to a bond filing, in mid-2013 the authority demanded that HU give it a deed conveying the parking unit free and clear of all mortgages and liens, including that held by the bondholder.
The bondholder refused, saying it was under no obligation to do so as long as any event of default existed. Upon negotiation, however, it agreed to release its lien on the unit for $3.6 million, which the authority then paid on Dec. 23. The bondholder retains its lien on all other property subject to the mortgage.
The $3.6 million was applied to the two payments HU had missed, Darr said, and on Dec. 6, a forbearance agreement was reached that required, among other things, that HU pay the bondholders $71,000 a month. HU made those payments in December and January, Darr said, and that agreement has now expired.
Bond filings also show that since last summer, there have been monthly calls in which HU updates bondholders on its student recruiting and enrollment, financial information, new strategic partnerships, academic programs, donors and opportunities for non-tuition revenue; it then fields questions. Darr said he instituted the calls, and they will continue.
The bondholders have been willing to work with HU, Darr said, noting that getting up to date on its payments obviously played into that. But, he said, the challenge for the university still exists.
“I can’t count on a parking transaction every two years,” he said. “Enrollments continue to climb, and we continue to put in place new programs.”