By Daniel Bases
NEW YORK (Reuters) - New York Military Academy, a 126-year-old preparatory school that counts billionaire Donald Trump among its graduates, faces the prospect of shutting its doors for good unless it can complete a deal to avoid a bankruptcy auction later this month.
Even though the heavily indebted school failed to open for the fall term, some of its faculty members are holding out hope for the school, located in Cornwall, New York, near the U.S. Military Academy at West Point.
Generations of parents have sent their sons to the academy's 112-acre Hudson Valley campus to learn discipline and prepare for college or careers in the military. In recent years, it also accepted girls.
In recent years, it has fallen victim to the declining popularity of military-oriented secondary education in the United States. A white knight has yet to step forward to rescue it.
Perhaps its most prominent graduate is Trump, the billionaire real estate mogul and the current front-runner for the Republican presidential nomination. In his school days, Trump was best known for his baseball prowess, rather than deal-making or brash political remarks.
The list of former students also includes Broadway composer Stephen Sondheim; big-band leader and composer Lester "Les" Brown; and Robert Benmosche, the finance executive who led insurer American International Group in the aftermath of the past decade's financial crisis. John Gotti Jr., the son of mob boss John Gotti Sr., is also an alum.
As late as Aug. 28, the school was preparing for the new term, sending letters of welcome to incoming students.
The school owes between $10 million and $12 million to creditors, its lawyer Lewis Wrobel told Reuters.
The main creditor is Cornwall Improvement, a local business group that's owed about $8.3 million.
The three parcels that make up the academy are scheduled to go under the court's auction hammer with a starting bid of $9.5 million. An appraisal valued the real property assets at $10.1 million.
The academy filed for bankruptcy March 3 but managed to complete the semester and graduate its 15 seniors.
Enrollment dropped from a high of more than 500 during the 1960's to less than 100 in the last academic year, according to sources familiar with the situation.
"The problem is the school entered into a downward spiral in enrollment in the last six years and got caught in a traditional squeeze of not being able to keep up with its costs," said Eduardo de Veer, chairman of Metacorp, a diversified company based in Aruba, and a former school trustee.
The academy had entered into a contract to be bought by California-based Global Preparatory Academies, for $13.2 million, Wrobel said. But the group failed to make the full down payment of $1.3 million, Wrobel said, leading a U.S. bankruptcy court to order a Sept. 30 auction.
"What little endowment they had they used to keep it afloat," de Veer said. "I am guessing the alumni have been reluctant to step in because they don't see the light at the end of the tunnel."
Mika Saarela, the dean of academics, said he still held out the possibility that the school could reopen this term.
"We have in fact not closed," Saarela said. "The Global Preparatory Academies plan has not fallen through and that is part of the ongoing process with the court," he said, based upon information provided by the school's board of trustees
He said the school was unable to open as planned on Sept. 14 because the deal has taken longer than had been expected.
Nick Pasalides, a lawyer representing Global Preparatory, declined to comment on any aspect of the deal nor confirm the identities of the principals, citing the policies of his firm Reich, Reich & Reich.
Trump, a 1964 graduate who was honored by the school in 1998, could not be reached for comment on whether he might be prepared to help the school financially.
Ted Tobias, a NYMA graduate who served in World War II fighting with the 10th Mountain Division, coached Trump for three years on the school's baseball team.
Describing Trump, Tobias, now nearly 90, said "one hell of a competitive attitude and one hell of a hitter."
"He was good enough to be scouted twice. West Point's coach watched him to play first base, and asked him if he'd like to attend. Trump wanted to win. He was very proud of himself," the former coach said.
(Reporting by Daniel Bases; Editing By Frank McGurty and Andrew Hay)