Horace Mann Yields Surge as Schools Stuck By Auctions
Horace Mann School, the $29,000-a- year preparatory school in the Bronx, and dozens more New York educational and cultural institutions just got stuck between the collapse of auction-rate bonds and an expired New York law.
Rates on $60 million of the securities sold by Horace Mann in 2002 rose to 5.4 percent last month from 3.4 percent. At nearby Riverdale Country School, where tuition is $35,250 for grades six through 12, interest jumped to 11 percent from 3 percent.
Interest costs almost doubled for borrowers in the $330 billion auction-rate bond market this year after banks stopped buying unwanted securities for the first time since they were created in the 1980s. Unlike local governments across the country, the New York institutions can’t convert the bonds into other types of debt after a state funding law expired Jan. 31.
“It’s a horrible situation,” said Andrew Alper, former chairman of the New York City Economic Development Corp. and a board member at Riverdale. “The only solution is to pay the bonds off or to pay a higher interest rate.”
Horace Mann officials declined to comment. Graduates of the 121-year-old school, located on 18 acres overlooking Van Cortlandt Park in the Bronx, include venture capital investor Alan Patricof, founder of private equity firm Apax Partners, and Eliot Spitzer. Spitzer, who in 2004 received the Alumni Council Award for Distinguished Achievement when he was attorney general, resigned as New York’s governor this month amid allegations that he patronized prostitutes.
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