Tuesday, July 24, 2012

Freedom Forum | Following the Libor money

The debt-heavy non-profit foundation best known for its Newseum in Washington got dropped into a story yesterday about the mushrooming scandal over Libor. That's the London Interbank Offered Rate, an average interest rate widely used to set trillions of dollars in mortgages and other loans. (Some of Gannett's debt is tied to Libor.) The scandal concerns whether global banks manipulated the interest rates used to determine Libor.

The museum appeared briefly in this Fiscal Times story: The managing director of the Swap Financial Group discussed ruinous losses incurred by cities that issued bonds tied to Libor. Swap Financial's clients include the Newseum, according to the story. But that's as far as the account goes.

In fact, I think it's actually Freedom Forum that could be at least indirectly caught in the scandal -- although it's unclear what that might mean for the foundation's finances.

In 2002, the D.C. government issued up to $300 million in revenue bonds on behalf of the foundation to finance construction of the Newseum and the adjoining apartment tower on Pennsylvania Avenue. Freedom Forum -- which is the original Gannett Foundation -- was to repay the bonds over 35 years from its endowment and museum revenue.

Indeed, the foundation's most recent public IRS tax return shows Freedom Forum owed $365.2 million at the end of 2010. The return describes the debt only as "bonds & notes payable." It doesn't identify the lender, and doesn't disclose the terms.

Questions, questions, questions
Is the interest rate on that debt 100% fixed? Might the D.C. government stick the foundation with any additional costs if the 2002 bond issue was, indeed, tied to Libor in a now-detrimental way? The tax return doesn't say.

What we do know is that Freedom Forum and Newseum interest costs have see-sawed wildly in recent years, contributing to dramatically higher operating expenses that have strained its finances.

I won't even try to seek answers from Freedom Forum; it hasn't responded to any of my questions since I first began reporting on its finances in 2008.

But perhaps some of the smarter finance types reading this blog can suss out the truth.

Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.

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