Brock’s top brass breathed a collective sigh of relief this past Tuesday, after inking a new deal with Waterloo-based Clarica Life Insurance that will see the insurance company loan Brock $22.3 million, $12 million of which will be earmarked to help pay for the new Earp residence. This new loan replaces a previous agreement between Brock and MFP Financial Services of Mississauga. In the previous agreement, MFP agreed to provide Brock with an investor who would put up $42 million in return for fee-for-service built into the cost of the loan. MFP’s practices have been called into question after the City of Waterloo launched a lawsuit against the financier along with Clarica, the investor in both the Waterloo and Brock loans. The suit alleges that MFP misled city officials as to the interest rate on the loan.
“For most of the last eight weeks, my time has been occupied … trying to hammer out an agreement that was amenable for all three parties,” said Atkinson, calling the negotiation process “very tough, but very fair.”
He said that he, along with other university administrators and the school’s board of directors, first began to re-examine the MFP brokered loan when problems first arose between MFP and the City of Waterloo.
“When deals started to get difficult in Waterloo … issues started to be raised,” said Atkinson. “We went back and looked at our arrangement … and upon second review, the arrangements were not in the long term best interests of Brock.”
Brock’s dealings with MFP when the school leased computers from the company. This lead to a deal with MFP’s new structured finance arm.
He said that Brock struck the deal with MFP’s structured finance division after the company approached the school with what Atkinson described as “some seemingly exceptional opportunities.” Atkinson does admit, however, that MFP was an unusual financial source for an institution used to receiving bank loans.
The new, smaller loan will go mostly towards financing the Earp residence, with the remainder to be invested. The interest from that investment, which Atkinson hopes will eventually add up to approximately $500,000 per year, will become an endowment fund, out of which will come scholarships and funds for the general improvement of student life. The primary change between the previous deal with MFP and the new agreement is the absence of almost $20 million that was to be used to refinance debt on existing residences.
Atkinson assures students that all the residences are currently being financed at market interest rates, and that “we are financing at a level the university can afford.”
“It’s a new way for universities to do business,” said Atkinson of non-bank financiers. “It’s sometimes a little bit uncomfortable for us, but it’s a reality.”