The country's oldest state school, Nelson College, is facing insolvency unless it can convince the government to fast track the sale of some of its assets.
The school owes nearly $3 million, most of it for redeveloping its boarding houses several years ago.
Nelson College headmaster Richard Dykes told RNZ the school had identified assets it could sell including old classrooms, land and one of its three boarding houses.
However, he said the Education Ministry had told the school it could take several years to realise the sales.
Dykes said that was too long, because the school's debt was expected to reach about $3.5 million in the first half of 2022, breaching the school's credit limit.
"We are working really positively with the minister and the ministry. However, at this stage they're indicating that it could be several years before we can divest ourselves of those assets. Now that creates a problem because our immediate need is right now, our debt is immediate, that asset could be into the years and we don't have the luxury of time," he said.
"We're already in debt, we have a credit limit, we'll reach our credit limit next year."
The school's debt stemmed from the renovation of two of its boarding houses between 2015 and 2018.
The work was based on the expectation the school would have 190 boarders per year, but those numbers did not eventuate.
In 2019, the school borrowed $2 million from its bank along with an overdraft of up to $1.5 million. At the end of June this year its debt was $2.9 million.
Dykes said the pandemic had exacerbated the situation by reducing income from international students last year and this year.
He said the school was confident it could retire its debt through asset sales. It had also cut costs and looked for new ways of making money.