The University of Idaho moved a big step closer today to a deal in which an affiliated nonprofit would buy the University of Phoenix.
Less than a month after the University of Arkansas System Board of Trustees narrowly refused to support a similar plan to buy Phoenix, the Idaho State Board of Education today unanimously approved a measure authorizing the Idaho university to create a nonprofit entity, NewU, for that purpose. The Idaho board also voted to authorize the execution of an asset purchase agreement.
According to University of Idaho President Scott Green and a Q&A on the university’s website, the actual transaction would not take place until early 2024, which also means another school could move faster than Idaho. At a recent UA board meeting, trustee Ed Fryar said at least two other institutions were talking with Phoenix. Further, a chart shared with board members indicated another closing condition include the ability to finance the huge transaction.
It appears, though, that Idaho has been moving fairly fast.
While Phoenix reached out to University of Arkansas System President Donald Bobbitt in early 2021, a related nonprofit, Transformative Education Services Inc., didn’t get formed in Arkansas until August 2022, and it still isn’t formally affiliated with the UA System. Yet, Idaho’s president said today that Phoenix only contacted that school in March of this year.
As in Arkansas, some in Idaho have also objected to a lack of board transparency about such a huge investment, though the Idaho president didn’t hesitate to publicly release the cost of the buyout — a $550 million purchase price in private funds — plus required reserves working capital and cost of issuance for a total of $685 million. When the cost came up during a UA System board meeting, someone alerted the speaker he needed not do so. And he quit before stating the full sum.
The Idaho Q&A also says the seller, Phoenix, would provide $200 million in cash that would transfer to NewU.
Brian Foisy, Idaho’s vice president of finance and administration, said one negative impact of a University of Phoenix purchase would be a possible decline in the University of Idaho’s Moody’s credit rating from A1 to A2 because it would appear the university was taking on so much debt.
One board member asked about the danger of Idaho’s being liable for Phoenix’s student loan debt, the subject of court challenges. But Green said the the University of Idaho is “very close” to buying an insurance policy to protect it in that regard. He did not say who’s paying for the insurance policy.
While Idaho’s proposal is similar to Arkansas’s, there also are differences. One is on how board members for the nonprofit are chosen. It’s unclear who named any of the board members to Arkansas’s TES Inc. But according to the Idaho plan, the board of regents would elect the majority of NewU’s board members. Plus, the UA System has yet to release as many financial details as Idaho did this week.
Foisy also said no Idaho taxpayer funds would be going toward the $550 million purchase price, and yet the sources of some other transactions mentioned were unclear. Further, the Q&A says the purchase would be supported through both taxable and non-taxable bonds.
As in Arkansas, Idaho’s proposal quickly encountered opposition and complaints of a lack of transparency. No public input was taken during today’s board meeting, and earlier in the day the Idaho Statesman wrote an editorial referring to the University of Phoenix’s history of regulatory and financial problems.
You can see the University of Idaho’s Q&A here.
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