Dowling College (Dowling) rated Ca negative, announced that it will cease operations as of June 3,
2016 after years of financial challenges and the recent failure to form an alliance with another educational partner.
The existing Ca ratings and negative outlook on the Series 1996 and 2002 bonds continue to reflect our expectation of modest recovery based on Dowling's very limited unrestricted cash and investments through FY 2015.
Dowling's financial challenges as incorporated in the rating and outlook included a multi-year trend of unsustainable enrollment declines (50% in last four years), insufficient annual cash flow to cover debt service, and very thin liquidity (12 days cash on hand at FYE 2015).
Our assessment of recovery includes debt service reserve funds and, for the Series 2002 bonds, a first leasehold mortgage and security interest in the financed facility, a residence hall on the Shirley (Brookhaven) campus. In conjunction with a debt forbearance agreement in July 2015, the legal security on the Series 1996 and 2002 bonds was expanded to include a mortgage pledge on certain residential properties, subject to a prior lien provided to the college's taxable bond holders. Based on FY 2015 audited financials, the net book value of all fixed assets was $53 million against total debt of $53 million and other payables of $10.5 million.
