Georgetown will be forced to pay higher interest on roughly $100 million of debt after the university failed to sell the debt in bonds at an auction on Jan 22. Georgetown relied on the financial firm Lehman Brothers to hold the bonds before the auction and to broker the deal. Because Lehman Brothers was unable to unload the bonds through the auction, Georgetown will be forced to pay Lehman an interest rate of 6.6 percent, higher than it had been paying before the auction, because the firm will continue to hold the university’s bonds until a successful auction. Institutions often finance their debts by issuing bonds, which provide them with readily available funds. The bonds must be repaid with interest after a specified time period. University spokesperson Julie Bataille said issuing bonds is part of the university’s plan for managing debt. “Of approximately $750 million total debt, [approximately] $550 million is in the variable rate auction market,” she said. “Georgetown’s financial plans include the university’s ability to manage debt as part of our overall financial strategy,” Bataille said. One financial expert said market forces were probably at fault for the failed auction. “At the moment, there are not a lot of people who want to buy these bonds because of the [national] mortgage crisis,” said certified independent financial consultant Robert Jenvey. Jenvey added that the timing and market conditions were bad for bond sales. “Not only was the interest rate too low for buyers, but it also happened around the Martin Luther King holiday and the height of an agitated market,” Jenvey said. “So it was bad timing.” The university was not the only party that failed to sell its bonds in auction last month. Reuters reported that Clark County, Nev., another Lehman Brothers client, also failed to auction off its bonds. A spokesperson from Lehman Brothers could not be reached for comment. unicipal bond auctions occur at least once every five weeks, and Clark County was able to successfully sell its bonds on Jan. 29. Firms such as Lehman Brothers and Morgan Stanley regularly bid on bonds they already hold to prevent failed auctions, making these failed municipal auctions extremely rare. However, Lehman Brothers did not take this course of action with Georgetown bonds. While municipal bond auction failures are still rare, failed auctions for other types of bonds have been growing in frequency over the past few months, according to Reuters. “Some 60 auctions have failed in recent months, representing about $6 billion in tied-up assets,” said Peter Crane, president and chief executive officer of Crane Data LLC, which tracks the market for mutual fund managers, in a Jan. 24 Reuters article. Bataille agreed that the market is causing problems in the general financial realm, thereby dragging Georgetown into the problem. “What is happening in the auction markets is a reverberation of what is being seen throughout the financial world because of the subprime mortgage crisis,” she said. Bataille said that Georgetown’s Chief Financial Officer Chris Augostini is speaking with financial advisers and the university’s Board of Directors to determine what actions to take “in the best interest of the university’s long-term financial position.”