Dowling's bonds downgraded by Moody's

Financially troubled Dowling College's junk-rated bonds just got hit with another downgrade.

The news comes as Dowling announces it has selected Jeremy D. Brown, head of Edinboro University in Edinboro, Pa., as its new president. Brown, credited by his Edinboro colleagues with improving the university's image and boosting its enrollment, will join Dowling on June 1.

Moody's Investors Service Tuesday night downgraded the Suffolk County college's debt and put it on notice that the rating could go lower over concerns about operating deficits and declining enrollment.

Were it not for the board of trustees giving $4.1 million to the school, it would have had a 3.3 percent operating deficit in its 2010 fiscal year, according to a Moody's report.

Moody's analyst Dennis Gephardt said that while large, unrestricted gift-giving by board members was not uncommon, Dowling's case was something of an "outlier."

"Unrestricted gifts and annual fund[raising] in particular are a component of the revenue pictures of many private colleges," he said. "When they're outsized and irregular, and you're thinking about the future of that organization, you do want to ask a question are they going to be able to bring in that elevated amount each year."

The school has also had to rely on a $2-million line of credit from TD Bank to meet its cash-flow needs, Moody's noted. That line of credit expires in October and the school had to get a waiver from the bank in 2009 when it failed to meet financial requirements.

It's not uncommon for some colleges with weaker financial cushions to turn to bank lines of credit, Gephardt said.

"The reliance on the line in this case is a symptom of lower liquidity and some of our concerns around that might be the ongoing availability of bank counterparties who want to extend them a line," he said.

Moody's lowered its ratings on $14.8 million of bonds issued by Brookhaven and Suffolk County industrial development agencies to B1 from B3. The college has $62.7 million of total debt outstanding.

Dowling offers degree programs in aviation, business, education, and arts and sciences, and has facilities in Oakdale, Brookhaven and Melville.

Enrollment at the college has declined in recent years. The last time Moody's upgraded the college's debt, in 2004, the institution had 5,172 full-time-equivalent students, compared with 3,963 in the fall of 2010.

Dowling interim chief financial officer Ralph Cerullo did not returns calls seeking comment.

Brown will replace interim president Scott Rudolph, who is credited with giving the college a substantial gift. Rudolph replaced former Suffolk County Executive Robert Gaffney, who stepped down as president last year along with several other high-level college officials.

David Ring, vice president for college administration and student affairs at Dowling, said he hopes Brown's appointment will bring stability to the college, which has lost a handful of high-profile administrators in the last year.

Ring said Brown's confidence and track record for enhancing academic programs and boosting enrollment made him stand out among about 80 other candidates. "We are all extremely enthusiastic about his arrival," Ring said. "He's very impressive."