(Bloomberg) -- University of the Arts, a private college in Philadelphia that trains future animators and dancers with roughly $50 million of municipal debt outstanding, is abruptly closing after its finances deteriorated. 

The college, founded in 1876 with about 1,200 full-time students, announced on Friday that it would close on June 7, marking the latest college to announce plans to do so this year. The school’s campus is located in a historic arts district of Philadelphia.

“Like many institutions of higher learning, UArts has been in a fragile financial state, with many years of declining enrollments, declining revenues, and increasing expenses,” Judson Aaron, chair of the board of trustees, and Kerry Walk, president of the college, said in a statement dated May 31. “We are struggling to make sense of the present moment.”

The school has a student-faculty ratio of 7.5 to 1 and offers degrees such as a master of music and master of fine arts, according to its website. Full-time tuition is $50,950.

A bevy of colleges have either shut or plan to do so, including the College of Saint Rose and Wells College in New York. The latest closing highlights the plight of small colleges in the US. Some have sold themselves to nearby, larger rival institutions. But those deals can fall through given the harsh economic realities in higher education — including ever-rising costs, declining enrollment and stubborn questions about the real-world value of certain degrees.

Muni Debt 

The college has around $50 million of muni bonds outstanding, according to data compiled by Bloomberg. The bonds were rated below investment-grade by Fitch Ratings, which downgraded the school’s debt to a B+ credit rating at the beginning of this year. 

At the time, Fitch cited the college’s “operational and financial vulnerabilities” stemming from its highly-specialized focus on the arts. 

The bonds are secured by mortgages on three university properties in the center of Philadelphia, which were appraised in 2017 at $36 million, Fitch analysts noted in a January report. One of those buildings was sold in fiscal 2023. 

Some of the college’s outstanding debt is insured, protecting investors. An uninsured, unrefunded security is priced at around 82 cents on the dollar as of Friday, according to Bloomberg BVAL pricing data. 

“We have done everything in our power to address this crisis and avoid the worst possible outcome: an abrupt closure,” Aaron and Walk’s letter said. “Yet we have reached this deeply painful outcome, which we know affects our entire community.”

Current students will have options to continue their programs by transferring to partner schools including Temple University, Drexel University, and Moore College of Art and Design, among others.

--With assistance from Andrew Harrer, Trevor Rowe and Nic Querolo.

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