NC HBCU | Saint Augustine’s University files for Chapter 11 bankruptcy in Raleigh

RALEIGH, N.C. (WTVD) — Saint Augustine’s University in Raleigh has filed for Chapter 11 bankruptcy, according to documents obtained by ABC11 on Tuesday.

The university reported owing between $50 million and $100 million to creditors, according to those filings. In a statement, the school described the move as a “voluntary bankruptcy filing” and said it hopes to “strengthen its financial foundation” over the long term.

A spokesperson also said the university will no longer continue litigation related to its accreditation status, marking a significant shift after more than two years of legal efforts to maintain that status.

“After careful evaluation, the Board determined that continuing litigation would not be a prudent use of resources,” the university said in its statement. “SAU will instead focus on supporting students through teach-out agreements, developing non-degree certificates and apprenticeship programs, and building a pathway toward reaccreditation.”

Financial records show the university estimates it has between 200 and 999 creditors, with assets valued between $1 million and $500 million. The filings also indicate the school owes $14.4 million to the Internal Revenue Service.

The university confirmed that interim President Dr. Jennie Ward Robinson has stepped down and is being replaced by Dr. Verjanis Peoples as interim president.

Saint Augustine’s had previously won an injunction in August allowing it to maintain accreditation and proceed with the fall semester.

Alumni of Saint Augustine’s said the school’s financial crisis could have been avoided, noting they have raised concerns for years about the future of their alma mater. Now, the historically Black university is bankrupt.

“This was the theft of the university,” said alumnus Steve Williams as news of the filing spread among graduates. “You have alumni that were screaming. You have many alumni that were screaming for help.”

ABC11 spoke with bankruptcy lawyer David Mills, who explained what the filing means.

“Chapter 11 is specifically designed to allow organizations such as St. Aug’s to reorganize their debt, shed themselves of unprofitable leases and contracts, and restructure,” Mills said.

University board members say the filing offers a comprehensive path to address financial challenges and move forward on a stronger footing. The university says it will continue operating during the process but will not pursue further litigation tied to its accreditation status, which is set to conclude May 15. The accrediting agency previously voted to revoke the university’s accreditation, citing ongoing financial issues.

Mills noted that bankruptcy is often misunderstood.

“Is this a liquidation? Loss of assets? Are they going out of business? They certainly could go out of business, but it certainly doesn’t mean that,” he said.

At the private HBCU’s campus on Tuesday, there were few signs of activity. Buildings appeared closed, windows dark, and foot traffic minimal. It is an environment that stood in stark contrast to the once-busy campus. However, Duke Energy confirmed that electrical service remains active.

When asked about the university’s future, Williams said, “I don’t know.”

Mills added that the university has 14 days, unless an extension is granted, to submit a full accounting of its assets and liabilities to the court.

Bleak outlook?

A Howard University law professor said a university’s recent bankruptcy filing signals serious financial trouble, even as school leaders describe it as a step toward stability.

Matthew Bruckner, a professor of law who teaches bankruptcy, said there are few examples of universities navigating the process successfully.

“There’s not a lot of examples of universities operating in bankruptcy,” he said.

Bruckner said the filing is typically a sign of an institution winding down rather than rebuilding.

“Mostly bankruptcy has been the end. It’s been a way to wind down proceedings,” he said.

He added that though bankruptcy may reduce debt obligations, it cannot solve the school’s underlying financial challenges.

“Bankruptcy doesn’t produce money. Bankruptcy will allow them to eliminate some debt payments, but that won’t produce new revenue for them, and they will definitely need new revenue going forward to be a vital entity,” he said.

The university, however, has framed the filing as a path to reset its financial foundation.

Another setback came Wednesday, when a school spokesperson confirmed the university will no longer continue fighting for its accreditation. Students graduating next month will receive degrees from an accredited institution, but future classes will need to transfer to an accredited school.

Williams said the developments are devastating.

“This was the death of a university. You had an alumni that was screaming, you have many alumni that was screaming for help. But because we’re a private university and not a public university, this is what happens,” he said.

The bankruptcy process could also affect faculty and staff. The university’s board has not ruled out layoffs, and Bruckner said attorneys will need court approval to continue paying employees.

“They will have to ask the judge in order to allow them to spend the money to pay payroll,” Bruckner said.

The university has not announced when additional decisions will be made as the case moves forward.

Make sure to download the ABC 11 mobile app | ABC11 North Carolina Apps for Connected TV, Mobile News, Echo