Vaughn College of Aeronautics and Technology in Queens has struck a deal with its municipal bondholders that requires it to add more students by the fall semester or else it must sell a training building in Astoria. Vaughn College, which specializes in teaching future pilots and air traffic controllers, reached a new agreement with bondholders after the school fell into a technical default on its debt. To avoid selling the building, the school must increase enrollment roughly 6% from current levels to 1,209 students in the fall, said Sharon DeVivo, president of the college. Freshmen enrollment must hit 360 students.
Colleges across the U.S. are facing enrollment pressures as less high schoolers go to college because of shifting demographics and the cost of a degree. Unlike a traditional liberal arts school, Vaughn College in Flushing — located next to LaGuardia Airport — is unique in its aviation focus area. Highly specialized institutions are especially hard-hit by demand fluctuations.
For the 2023 fiscal year, the college did not meet a certain debt service coverage ratio — a measure of a borrower’s ability to pay its debt — which is considered a technical default under the loan agreement, according to a March 22 filing by the trustee, UMB Bank.
If the school can’t meet that enrollment threshold, Vaughn College must list for sale its property in Astoria, located at at 43-05 20th Avenue.
The proceeds of any sale of the building would then be used to help pay bondholders. The college has $46 million of muni-bond debt outstanding, according to data compiled by Bloomberg. As part of the forbearance agreement, which lasts until March 15, 2025, the trustee will waive the default. DeVivo said in an interview that the school is working to avoid selling the building.
“We are really, really focused on enrollment for the fall,” she said, noting that while applications have ticked up for the fall, the school has been affected by the troubled rollout of FAFSA, a key financial aid program.
The Astoria building is used for the college’s Aviation Training Institute, where students learn how to maintain aircrafts. The school says students with a bachelor’s degree typically have an advantage when trying to enter the field of aviation maintenance.
Vaughn College sold junk-rated bonds in 2016 in part to finance the Astoria building. About $9 million of the bond proceeds were used to acquire that facility.
As part of the forbearance agreement, the college will hire investment bankers or other advisers to explore a potential restructuring of the college’s debt and other “remedial initiatives,” the filing says.
In February, DeVivo wrote a report noting the school’s role training future air traffic controllers amid expectations for a shortage of those workers. The school is part of the Air Traffic-Collegiate Training Initiative, which lets students bypass the first six weeks of training by the Federal Aviation Administration.
Amanda Albright, Bloomberg , 2024-04-02 12:03:03
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