Catholic college misses debt service payments as its days near an end

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The College of New Rochelle has defaulted on bond payments in the waning days of the school’s existence.

The Catholic school received default notices from the Dormitory Authority of the State of New York on principal and interest payments due on bonds that the conduit issuer sold on behalf of the college in 2008, according to a June 19 filing. Citizens Bank, a letter of credit provider on the $40 million of variable-rate revenue bonds, said in the filing on the Electronic Municipal Market Access that it had drawn on the letter of credit with the college owing it $64,502.15 that was due June 3.
The notices were sent on May 13 and June 11, according to UMB Bank, a trustee for the bonds, shortly after CNR announced it would be closing at the end of this summer following a debt crunch. The college said in a June 6 filing that it plans to file for Chapter 11 bankruptcy “at some point” after the end of academic instruction on Aug. 10.

“Certain of the College’s secured creditors have served default notices for the purpose of preserving all of their legal rights going forward, but no enforcement actions have been taken,” CNR spokesman Geoff Thompson said in a statement. “The College continues to work cooperatively with its secured creditors toward an orderly winding up of the College’s operations.”

CNR, which operates five campuses in the New York City area, discovered $31 million in unmet financial obligations in 2014, including $20 million in unpaid payroll taxes. The school unsuccessfully attempted to combat the mounting debt through a December 2016 auction of five single-family homes located adjacent to its flagship New Rochelle campus, staff reductions, cutting two administrators and refinancing $6 million of revolving line of credit obligations.

The 115-year old Catholic school in New York’s Westchester County crafted a memorandum of understanding agreement with nearby Mercy College to absorb impacted students and some faculty. Mercy, whose main campus is in Dobbs Ferry, New York, will not assume any of CNR’s debt under this agreement.

After CNR announced its closure, the school’s comptroller, Keith Borge, pleaded guilty to Securities and Exchange Commission charges for defrauding municipal securities investors and concealing the school’s deteriorating finances. He was also charged with failing to pay payroll taxes and is scheduled for sentencing on Aug. 28.

CNR is among a number of Northeast private colleges that have been forced to close due to debt challenges including Southern Vermont College, The College of St. Joseph’s, Green Mountain College and Newbury College in Brookline, Massachusetts. Hampshire College in Amherst, Massachusetts is also in danger of shuttering after announcing earlier this year it will not accept a full freshman class for this fall while it seeks a strategic partner.

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Higher education bonds College of New Rochelle New York State Dormitory Authority New York