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Bank of America writes off Aquarium loan?

Warwick Jones, Editor

We are not normally in the habit of passing on rumors. But this one is so prevalent and credible, that we will break our custom. As the story goes the Bank of America has written off its share of the bank group loan to the Aquarium. At the end of 2003, the loan amounted to $8.7 million and we suspect that it was not much less than this at the end of 2004. Bank of America was the lead banker in providing the loan.

Is a write off surprising? Yes and No. It is not surprising in that the Aquarium has little hope of paying off the debt, at least from operating cash flows. Indeed, it has relied on gifts and grants to meet operating and interest commitments. Little progress has been made over the years on paying back the loan principal. So under normal circumstances, a bank with a prudent policy would have made the write off. However, an agreement exists that virtually requires the City of Charleston to repay the loan in the event of a default. Readers are referred to our comment published on September 27, 2004, "The Aquarium - a potential problem for the City?"

It seems that the obligation of the City now makes no difference. Why, we do not know? Maybe the Bank fears the opprobrium if it forecloses on the Aquarium.

A write off of the loan does not absolve the Aquarium of the financial liability. It is simply recognition in the books of the Bank of America that it is unlikely to receive payment. And it also calls into question a comment a few months ago by the Mayor that the Aquarium was operating with a positive cash flow.

If the rumor turns out to be true, we look forward to the spin that will be placed on explaning the loan write off.

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