The University of Arkansas System board of trustees approved entering into a loan agreement of up to $19.1 million to help the Razorback athletic department make payments this year and next on debt from facilities bond issues.
As reported by the Northwest Arkansas Democrat Gazette, the loan is a way to refinance annual debt payments and is considered a part of other cost-reduction efforts taken because of the COVID-19 pandemic's effects on athletics, UA officials told the board. Athletic director Hunter Yurachek told board members that the department expects to see at "a minimum" a $20 million reduction in revenue from the $124.6 million originally projected for the year. "Additional shortfalls and revenues can be anticipated if additional events are canceled or further adjustments have to be made to our venue capacity levels," Yurachek said.
The University of Arkansas System announced the meeting just hours before it began, with the loan agreement the only item on the agenda.
The loan, with Regions Bank, is to be paid off "interest only" in the first three years, with the principal then to be paid back over five years. "The payback will coincide with a forecast for additional revenues from the Southeastern Conference," Clayton Hamilton, the top finance officer for UA's athletic department, said.
The loan is to have a maximum interest rate of 2 percent annually and be paid off by Sept. 15, 2028, according to the resolution approved by the board without any opposition. The resolution says the loan's default rate is not to exceed 4 percent annually.
Athletics department debt at UA has increased in recent years because of various construction and renovation projects.
Taxable bonds for $90 million and tax-exempt bonds for $24,485,000 were issued in 2016 for an expansion of Donald W. Reynolds Razorback Stadium and replacement of the Frank Broyles Athletic Center, according to the Democrat Gazette. Donor gifts also helped pay for the project, which cost about $160 million.
Bond issues are also being used to help pay for several other athletics facility projects, including a $27 million baseball development center approved by trustees last year.
Total athletic department debt as of June 30 — the end of UA's fiscal 2020 — was $163.4 million, a UA spokesman said. Future interest payments are not counted in the debt total.
