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U.S. Charter Schools Rating Actions, Second-Quarter 2022

During the second quarter of 2022 (April 1 – June 30), S&P Global Ratings changed its rating or revised the outlook on 27 U.S. charter schools across the sector, while 72 ratings were maintained (in addition, five ratings were initially assigned). The 27 rating actions are broken out as follows:

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These actions reflect a sector that is experiencing continued stability and flexibility resulting from growing demand and generous federal funding received during the COVID-19 pandemic. For many schools in our rated universe, there is still a material percentage of those funds to be spent during the 2023 and 2024 fiscal years. Enrollment remains stable to growing and, although the threat of new variants remains, school boards and management teams have had time and financial resources to focus on providing the highest quality in-person learning environment possible for their students.

In June, we published "U.S. Charter Schools Sector Fiscal 2021 Medians: Schools Get A Booster From Pandemic Relief," which highlighted a variety of factors that led to our median financial metrics for rated charter schools strengthening in fiscal 2021, along with what effect that may have in the charter schools sector for fiscal 2023 and beyond. Fiscal 2021 median improvement was anticipated as a result of sizable amounts of pandemic relief, specifically the third round of ESSER funding for public K-12 schools that extends through September 2024, as well as increased per-pupil funding trends in most states, as discussed in the report. While most of the factors mentioned have generally provided positive tailwinds to the sector, the report also discusses broader economic concerns such as inflationary pressures and recession risk that could influence charter schools going forward.

Year to date through the first half of 2022, S&P has upgraded nine charter school ratings versus only three ratings downgrades. This 3-to-1 upgrade-to-downgrade ratio is a continuation of a favorable trend that we first observed in 2021, where the number of upgrades outpaced downgrades for the first time in the previous ten years. This trend has also carried over into our outlook revisions, where year to date there have been 11 outlooks that have been revised to positive, versus only four outlooks that have been revised to either negative or CreditWatch negative.

Most of the positive rating actions in the second quarter of 2022, which included nine outlook revisions (three to stable from negative and six to positive from stable) and seven rating upgrades, were spurred by improvements in liquidity, sustained healthy financial operations, and demand. The three negative rating actions and three negative outlook revisions taken in the second quarter were in large part driven by sustained declines in enrollment that have pressured financial operations and weakened MADS coverage and liquidity levels.

Notably, in addition to our positive and negative actions, S&P added five new public charter school ratings in the second quarter. Three of these are in the investment-grade category. The issuers spanned the country, with ratings added in Florida, New York, Utah, and Washington, D.C. Year to date through the first half of 2022, we have added 16 new public charter school ratings.

The following tables summarize S&P Global Ratings' quarterly rating actions, outlook revisions, and maintained ratings for U.S. charter schools. The rating actions, outlook revisions, and maintained ratings are based on our "U.S. Public Finance Charter Schools: Methodology And Assumptions" criteria, published Jan. 3, 2017 on RatingsDirect.

Table 1

Second-Quarter 2022 U.S. Charter Schools Rating Actions
Institution State Rating To Rating From Outlook To Outlook From Rating Action Description
Academies of Math and Science AZ BB+ BB Stable Stable Rating Raised Improved demand, operating results, coverage, and liquidity.
Crossroads Charter Academy MI B+ BB- Stable Negative Rating Lowered Precipitous enrollment declines over the past three years.
Flagstaff Academy AZ BBB- BBB Stable Negative Rating Lowered Enrollment declines pressuring operations and MADS coverage.
Global Community Charter School NY BB+ - Stable - Rating Initially Assigned New Rating
Grand Concourse Academy Charter School NY BBB- - Stable - Rating Initially Assigned New Rating
Green Woods Charter School PA BB+ BB Stable Stable Rating Raised Solid balance sheet metrics, recent five-year charter renewal, and steady enrollment and demand profile.
HOPE Community Academy MN BB- BB Stable Negative Rating Lowered Weakened financial profile stemming from initial enrollment challenges leading to weaker financial metrics.
Inspired Teaching Demonstration Charter School DC BBB - Stable - Rating Initially Assigned New Rating
KIPP Nashville TN BBB BBB- Stable Stable Rating Raised Sustained healthy financial performance, supporting growth in days' cash on hand and improved MADS coverage, that we expect will continue.
Liberty Charter School, Nampa ID BBB+ BBB Stable Stable Rating Raised Sustained healthy financial performance, supporting growth in days' cash on hand and improved MADS coverage.
Manatee School for the Arts FL BBB- - Stable - Rating Initially Assigned New Rating
Parnassus Preparatory School MN BB+ BB Stable Stable Rating Raised Improved financial performance, debt burden, and cash position all coupled with steady demand.
PUC Schools CA BB+ BB Stable Stable Rating Raised Substantial improvement in the organization's financial profile following a very healthy operating surplus in fiscal 2021.
Voyageur Academy MI B+ B Positive Stable Rating Raised Recent five-year charter renewal and a trend of improved financial performance over the past few audited years, which we expect to continue.
Wallace Stegner Academy UT BB+ - Stable - Rating Initially Assigned New Rating
Footnote: MADS = maximum annual debt service

Table 2

Second-Quarter 2022 U.S. Charter Schools Outlook Revisions
Institution State Rating Outlook to Outlook from Description
Aspire Public Schools CA BBB Stable Negative Improved financial performance, stabilzing enrollment, and strengthened liquidty position.
Bronx Charter School for Excellence NY BBB- Positive Stable Strengthening overall financial profile, including improved operational performance and a healthy cash position for the rating.
Flint International Academy MI BB Stable CW Negative Receipt of all requested information relevant to our review reflecting a consistent credit profile.
Great Oaks Legacy Charter School NJ BB+ Positive Stable Continued enrollment growth, solid demand, and improved financial metrics.
Kaizen Education Foundation AZ BB Stable Negative Lowered risk of charter revocation associated with one of its campuses.
Littleton Preparatory Charter School CO BB+ Positive Stable Improved financial metrics, with healthy margins, strengthening MADS, and solid days' cash on hand.
MaST Community Charter School PA BBB- Positive Stable Improved financial metrics with consistently healthy full-accrual operating margins, strengthened lease-adjusted MADS coverage, and solid days' cash.
Math & Science Academy Building Company MN BBB- Negative Stable Weakened MADS coverage and softer operating performance.
Nova Academy TX BB Negative Stable Weakened enterprise profile, with material enrollment declines in five of the past six years, from a high of 962 students to 674 students in fall 2021.
Scuola Vita Nuova Charter School MO BB+ Positive Stable Enrollment growth after expansion, supporting improved MADS and liquidity.
Texas Leadership Charter Academy TX BB Positive Stable Strengthening financial profile, including growth of unrestricted reserves and a sustained trend of positive operating performance, with projections of continued maintenance at similar levels through the outlook.
West Philadelphia Achievement Charter Elementary School PA BB- Negative CW Negative Continued uncertainty around charter renewal decision timeframe with the School District of Philadelphia.

Table 3

Second-Quarter 2022 U.S. Charter Schools Maintained Ratings
Institution State Rating Outlook
Albany Leadership Academy NY BB Stable
American Leadership Academy UT BBB Stable
Arlington Classics Academy TX BBB- Stable
Aspen Ridge Preparatory School CO BB Stable
Austin Achieve Public Schools TX BBB- Stable
Austin Achieve Public Schools TX BBB- Stable
Avon Grove Charter School PA BBB- Stable
Avondale Meadows Academy IN BB Stable
Bay Haven Charter Academy FL BBB Stable
Berean Academy AZ BB Stable
Brookside Charter School MO BB Stable
Candeo Schools, Inc. AZ BBB- Stable
Carolina International School NC BB+ Stable
Chester Charter Scholars Academy Charter School PA BB+ Stable
Chicago Charter School Foundation IL BBB Stable
Choice Academies AZ BB Stable
Citizens of the World Charter School - Los Angeles CA BB- Stable
Classical Academy Charter School CO BBB Stable
Classical Academy, Inc. CA BBB- Stable
Community of Peace Charter School MN BBB- Stable
Compass Public Charter School ID BB Stable
Conner Creek Academy MI B Stable
Coral Academy of Science-Las Vegas NV BBB- Stable
Dr. Joseph F. Pollack Academic Center of Excellence MI BB Stable
Duluth Edison Charter Schools (Tischer Creek Duluth Building Co.) MN BB+ Stable
Eagle Advantage Schools TX BB+ Stable
Eagle Ridge Academy CO BBB- Stable
Excel Academy Charter School CO BBB- Stable
Fenton Charter Public Schools CA BB+ Stable
Foundation Academy Charter School NJ BBB- Stable
Freedom Academy AZ BB+ Stable
Frontier Academy CO BBB- Stable
George Washington Academy UT BBB- Stable
Hawthorn Academy UT BBB Stable
High School for Recording Arts MN B Stable
Hmong American Peace Academy WI BBB Stable
Hmong Education Reform Company MN BB+ Negative
Idea Public Schools TX A- Negative
Independence Academy CO BBB- Stable
John Adams Academies CA BB Stable
King Chavez Academies CA BB+ Stable
Lakeview Academy UT BBB- Stable
Literacy First Charter School CA BBB- Stable
Memphis Rise Academy TN BBB- Stable
Noah Webster Academy UT BBB- Stable
Noah Webster Basic Schools, Inc. AZ BB Stable
Noble Network of Charter Schools IL BBB Stable
North Star Academy Charter School of Newark - 18th St. Ave. LLC NJ BBB- Stable
North Star Academy Charter School of Newark - NSA 377 Washington St. LLC NJ BBB- Stable
Oakland International Academy MI BBB- Stable
Ogden Preparatory Academy UT BBB- Stable
Paramount School of Excellence IN BB+ Stable
Philadelphia Performing Arts Charter School PA BB+ Stable
Pinecrest Academy, Inc. FL BBB Stable
Propel Schools - Braddock Hills PA BB+ Negative
Responsive Education Foundation TX BBB Positive
River Springs Charter Schools CA BB Positive
Sarasota School of Arts and Sciences FL BBB- Stable
School Lane Charter School PA BBB- Stable
Sculptor Charter School FL BBB- Stable
Spectrum High School MN BB+ Stable
Star International Academy MI BBB Stable
The Charter School for Applied Technologies NY BBB Stable
The Palmdale Aerospace Academy CA BB Stable
Tipton Academy MI BB Stable
Trinity Basin Preparatory TX BBB Stable
Universal Academy MI BBB- Stable
Universal Learning Academy MI BB+ Stable
Villa Montessori AZ BBB- Stable
Wayside Schools TX BB Stable
Winfree Academy Charter Schools TX BB- Stable
Xavier Public Charter School ID BBB Stable

Related Research

This report does not constitute a rating action.

Primary Credit Analysts:Jessica L Wood, Chicago + 1 (312) 233 7004;
jessica.wood@spglobal.com
Avani K Parikh, New York + 1 (212) 438 1133;
avani.parikh@spglobal.com
Secondary Contacts:Ryan Miller, Dallas +1 2148711408;
ryan.miller@spglobal.com
John Miceli, Dallas +1 2148711471;
john.miceli@spglobal.com

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