When tiny Cazenovia College announced it was shutting its doors for good in late June, it became just the latest example of the mounting economic crisis facing countless private institutions in the US today.
(Bloomberg) — When tiny Cazenovia College announced it was shutting its doors for good in late June, it became just the latest example of the mounting economic crisis facing countless private institutions in the US today.
Like scores of smaller, less-prestigious schools before it, plummeting enrollment pushed Cazenovia to the point where it couldn’t pay back the $25 million it owes creditors. Now, as the 200-year-old institution in rural upstate New York embarks on the tough task of winding down and liquidating, Cazenovia serves as a useful reminder of the challenges that other troubled colleges could face in the ever-widening shakeout of higher-ed in America — and for Wall Street as investors pick apart the school’s assets.
“It’s such a complex process,” Cazenovia’s President David Bergh said, adding that a colleague who’d been through a college closure told the staff “‘this is going to be the worst experience of your professional life.’”
Bergh said the college plans on filing for Chapter 11 bankruptcy protection but the timing is undetermined. In the meantime, a regulatory filing in late July sheds some light on Cazenovia’s long journey.
When a college shutters, bondholders’ prospects for recovering its money relies on the sale of its assets. Real estate is typically a school’s biggest asset, said Mark Podgainy, managing director at Getzler Henrich & Associates LLC, who works with distressed colleges.
For Cazenovia, located 250 miles from New York City, its real estate holdings include a 240-acre equine facility with roughly 70 stalls, which can be sold separately. Bondholders, which include Nuveen LLC and abrdn Plc, had the right to foreclose on the property but they have not done so. Such a move could devalue the real estate.
A spokesperson for abrdn declined to comment. A spokesperson for Nuveen did not respond to a request for comment.
The campus was appraised at $26 million in 2022 when the school unsuccessfully sought to sell bonds to refinance the debt that would go on to trigger the school’s closure.
“Based on my experience, when a college liquidates you are unlikely to get what the appraised value was,” said Podgainy, speaking broadly about similar situations.
Bergh said he could see the campus becoming a site for an arts program, agricultural training or even a senior living facility. Based on early interest, he’s confident a permanent buyer will be found.
Until that buyer comes along, the school is leasing its campus to New York state, which will use the site to train police cadets, through July 31, 2025, the regulatory filing said. The $1.5 million annual rent will go to the trustee, UMB Bank, which represents the bondholders.
Restructuring colleges can be more challenging than restructuring a corporation, Podgainy said, adding that college closures can be very emotional. And even filing for bankruptcy doesn’t provide schools “a viable path for a financial turnaround,” said Moody’s Investors Services in a report.
For Cazenovia, its yearbooks and artifacts will be memorialized in a room and garden created by nearby Le Moyne College on its campus in Syracuse, the private Catholic college said. And Cazenovia’s 40 horses were gifted to alumni and friends of its equine program, Bergh said.
Cazenovia intends to recommend giving its remaining endowment of roughly $7 million, to Le Moyne, according to Bergh. The funds are restricted and outside of the scope of creditors. The state attorney general, the Department of Education and the court decides where those funds go.
Bergh said his priority was making sure that students, faculty and staff were taken care of. The school secured agreements with other institutions who took on current students and many employees have already landed roles with other colleges nearby, he said.
“This has been a heartbreaking process,” Bergh said. “It’s OK for us to feel good about us doing it the right way with all of those constituencies in mind.”
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