Credit rating for Birmingham-Southern College has hit junk-bond status, meaning the city of Birmingham's $5-million loan is not likely to ever be repaid

Birmingham-Southern College

 

The financial condition of Birmingham-Southern College, once considered one of Alabama's finest liberal-arts schools, has sunk to junk-bond status, meaning the city of Birmingham's $5-million loan to the college probably will never be repaid, reports longtime Alabama attorney Donald Watkins.

Under the headline "Birmingham-Southern College De-Listed by Moody’s Credit Rating Agency," Watkins writes:

Moody’s is a global integrated credit-rating agency. On December 22, 2023, Moody’s quietly de-listed Birmingham Southern College (BSC) as a credit rated institution. 

Today, BSC has no Moody’s credit rating whatsoever. Moody's withdrew it on December 22.

The de-listing occurred AFTER Moody’s formally placed BSC under a special review of its credit rating on November 21, 2023, due to a lack of sufficient information.

Yet, on November 28, 2023, the city of Birmingham awarded BSC a whopping $5-million loan to stay open for the spring of 2024.

Was that a wise move by the city? No, says Watkins:

Furthermore, the city’s $5-million loan was awarded AFTER Alabama State Treasurer Young Boozer, III, denied BSC a $30-million loan in October 2023 under Alabama's newly passed Distressed Institutions of Higher Learning Revolving Loan Fund Act (2023).

Prior to the December 22 de-listing of BSC, Moody’s rated BSC as “Caa2,” which is the equivalent of a junk bond. (Moody's defines Caa-rated obligations as those that “are judged to be of poor standing and are subject to very high credit risk.”)

In Moody's Investors Service's ratings system, securities are assigned a rating from Aaa to C, with Aaa being the highest quality and C the lowest quality.

Has this story been widely reported in the state's mainstream media (MSM)? No, Watkins says,, and there is a reason for that:

News of BSC’s de-listing has been quashed in the state’s legacy news media. In fact, these news-media organizations have been supportive of the loans sought by BSC, as evidenced by their numerous  "glory days" stories and editorial opinions on BSC.

No government agency in the history of Alabama has loaned taxpayer money to a private educational entity with a “Caa2” Moody’s junk-bond credit rating. 

Now, $5 million in Birmingham taxpayer dollars is completely exposed to the full range of the credit risks of BSC, a de-listed Moody’s borrower.

For all practical purposes, the city's $5 million is gone. City of Birmingham taxpayers are left holding a bag full of empty promises from an institutional borrower whose ability to repay this $5-million debt died a long time ago.

At this juncture, it is impossible to save BSC.