Source of settlement loans announced

A memo faxed to priests Dec. 6 outlined how the archdiocese will finance clergy abuse settlements totaling approximately $90 million. The memo was sent to priests after a meeting scheduled for that day with Archbishop Seán P. O’Malley was postponed due to the nor’easter that dumped record amounts of snow in some areas of the region.

The memo, which was sent by moderator of the curia Bishop Richard G. Lennon, explains that the $90 million amount is a combination of the $85 million settlement with 541 victims of abuse and a small number of individual settlements expected to amount to between $3 million and $4 million.

To obtain this amount of money by Dec. 22, the date that settlement checks will be issued, the archdiocese will obtain short-term loans from a number of sources. According to the memo and previous statements by archdiocesan spokesman Father Christopher Coyne, money from insurance carriers and the sale of approximately 28 acres of archdiocesan property, including the former Cardinal’s Residence, will be used to repay the loans.

The memo states that the terms to fund the abuse settlements were worked out by a committee consisting of Archbishop O’Malley, Bishop Lennon, Attorney Thomas Hannigan, Attorney Wilson Rogers, Jr., Father John Connolly and Chancellor David Smith.

The process of planning how the archdiocese would fund the $90 million began as settlement negotiations were wrapping up and took six to eight weeks, said Smith.

"We knew we wouldn't be in a position to liquidate the real-estate or settle with the insurance companies by the time the settlement was signed and by the time the payment was due, so we began trying to work out the financing," Smith told the Pilot.

Though Smith explained that the archdiocese took out two-year loans, he would not speculate how quickly the archdiocese would be able to repay them.

"We're going to pay the loans back out of the settlement with the insurance companies and the timing of that is very much uncertain," the chancellor stated. "The sale of such a large parcel of real-estate is a fairly complex transaction -- that is not going to happen in the next 90 days."

"We borrowed the money for two years, so we think within that two year period we will be able to accomplish both tasks," he continued. "They may happen very quickly, they may happen very slowly. It's hard to tell."

The memo states that the bulk of the $90 million will come from two bank loans: $65 million from Citizens Bank and $10 million from Century Bank. In order to secure these loans the archdiocese had to “pledge” money that it plans to obtain from its insurance carriers and from a second mortgage on St. John Seminary in Brighton.

"Even the pledge of all of that collateral was insufficient to bring the banks into the transaction," the memo states.

The banks also required “individual guaranties totaling $25 million.” The archdiocese had discussions with a number of individuals willing to offer the guarantee, but ultimately “one stepped up to guarantee the entire $25 million.”

Smith expressed his thanks to the donor, who remains unnamed, and to the two banks that pledged their resources to the archdiocese.

"We are grateful," Smith said of the individual donor. "If we had not had people willing to step up and do what was done, there would not have been a financing and we would not have been able to make the [settlement] payments."

In thanking the financial professionals at the banks, Smith said, “they set aside large blocks of their time to work with us to get this done.”

"This was an amazingly complicated transaction and it was put together very quickly with the assistance of financial professionals and these institutions," he continued.

Also figuring into the equation is a $7.5 million loan from the Cemetery Association Perpetual Care Fund. This loan, said Smith, was used to repay an existing mortgage on St. John Seminary in order for the archdiocese to take out a second mortgage on the portion of the seminary grounds that the archdiocese is not selling.

The remaining $15 million needed to fund the settlements will be borrowed from the Clergy Retirement Disability Trust, the fund that provides for diocesan priests after they retire. According to the memo, this loan will be secured by a mortgage on the Cathedral of the Holy Cross.

The memo also notes the sale of a series of Church properties that Bishop Lennon authorized while apostolic administrator. According to the memo, the archdiocese hopes to collect “in excess of $20 million” from the properties and will use the money to help pay for carrying costs on the loans, outreach and abuse prevention programs and a portion of the of abuse settlements.

Smith declined to name the properties being sold, but said that they number between 10 and 15. However, he confirmed media reports that among the properties the archdiocese will sell are: the former Cardinal Cushing Resource Center in the South End; the former church hall of St. Leonard of Port Maurice Parish in the North End; 12 acres of land on Forest Lake in Methuen; and property of the closed Our Lady of Pity Parish in Cambridge.

Archbishop O’Malley’s meeting with priests is rescheduled for Dec. 16, when he plans to speak more extensively on the funds to be borrowed from the clergy retirement fund.