During the first quarter of 2024 (Jan. 1-March. 31), S&P Global Ratings changed its rating or revised the outlook on 25 U.S. charter schools. S&P Global Ratings also assigned four new ratings and maintained 37 ratings across the sector. The 29 rating actions are broken out as follows:
In January, we published "U.S. Charter Schools 2024 Outlook: Credit Stability, For Now," which highlighted factors likely to influence the charter school sector in 2024, such as how demographic trends and the expansion of voucher programs across the country could affect enrollment, and how budgets could be stressed amid dwindling emergency federal funding that has provided financial flexibility in recent years. We also recently published "U.S. Charter Schools Rating Actions, 2023," reflecting all rating actions in the charter school sector for 2023, wherein the total number of positive and negative rating actions were almost equal.
S&P Global Ratings took seven positive rating actions in the first quarter of this year, raising three ratings as well as revising four outlooks: three to positive from stable, and one outlook to stable from negative. These actions were mostly spurred by sustained trends of improvements in key financial metrics, including strengthened operating margins and growing liquidity. In a couple of cases, the positive rating actions were a result of healthy enrollment increases while the schools maintained sound operations on completion of expansion projects.
As discussed in our January outlook report, we expect rising costs and labor shortages will create greater operating challenges for those schools with less financial flexibility in 2024. We also project these significant operating pressures at smaller schools with lean management oversight, coupled with enrollment declines, could lead to technical covenant violations, such as a breach of a debt service coverage covenant. Through first-quarter 2024, we have seen an uptick in covenant violations, particularly at smaller schools and those experiencing leadership transitions and enrollment challenges. Together, these various pressures resulted in our taking 18 negative rating actions during the quarter, consisting of eight downgrades, and revising the outlook on 10 ratings to negative (three outlook revisions were to stable from positive, and we placed another rating on CreditWatch negative from a stable outlook).
In addition to the positive and negative rating actions, S&P Global Ratings added four new charter school ratings in the first quarter for issuers in Colorado, Utah, Rhode Island, and Washington D.C.
The following tables summarize S&P Global Ratings' quarterly rating actions, outlook revisions, and unchanged ratings for U.S. charter schools. The rating actions, outlook revisions, and unchanged ratings are based on our "U.S. Public Finance Charter Schools: Methodology And Assumptions" criteria, published Jan. 3, 2017.
Table 1
First-quarter 2024: U.S. charter schools rating actions | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Institution | State | Rating to | Rating from | Outlook to | Outlook from | Rating action | Description | |||||||||
Athenian eAcademy |
UT | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Albany Leadership Charter High School For Girls |
NY | B+ | BB | Negative | Stable | Rating lowered | Lower-than-expected enrollment after middle school expansion leading to consecutive operating deficits that are expected to continue in fiscal 2024. | |||||||||
Amplus Academy (Nevada Charter Academies d/b/a Amplus Academy) |
NV | BB+ | BB | Stable | Positive | Rating raised | Enrollment increases and improving financial metrics following succesful kindergarten to grade 5 expansion. | |||||||||
Ascent Classical Academy Charter Schools |
CO | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Duluth Edison Charter School |
MN | BB | BB+ | Negative | Stable | Rating lowered | Persistent enrollment declines which pressured financial performance leading to DSC violation in fiscal 2023. | |||||||||
East Harlem Tutorial Program |
NY | BB | BB+ | Stable | Stable | Rating lowered | Weakened financial profile following a full-accrual operating deficit and MADS coverage of less than 1.0x in fiscal 2023. | |||||||||
Evolution Academy Charter School |
TX | B | B+ | Negative | Stable | Rating lowered | Trend of weak operating performance, leading to fiscal 2023 MADS coverage below 1.0x and a precipitous decline in liquidity projected in fiscal 2024. | |||||||||
Hanley International Academy |
MI | BB+ | BB | Stable | Positive | Rating raised | Healthy margins and improved DSC metrics following series 2021 refinancing. | |||||||||
Jacquelyn Y. Kelley Discovery Charter School |
PA | BB | BB+ | Stable | Stable | Rating lowered | Weakened liquidity position and operations combined with management turnover and softening demand. | |||||||||
Math & Science Academy |
MN | BB+ | BBB- | Negative | Negative | Rating lowered | Confirmed plans to issue additional debt coulpled with deficit operations and declining liquidity levels. | |||||||||
Memphis Rise Academy |
TN | BB+ | BBB- | Negative | Stable | Rating lowered | Declining liquidity and weak operating performance resulting in a financial ratio covenant violation. | |||||||||
PACT Charter School |
MN | BB | BB+ | Negative | Negative | Rating lowered | Declining liquidity position and growing expense base amid an increased debt burden from the school's recent expansion. | |||||||||
Paterson Charter School for Science & Technology |
NJ | BB+ | BB | Stable | Positive | Rating raised | Consistent trend of enrollment growth through expansion to additional school sites and improving financial operations. | |||||||||
Rhode Island Nurses Institute Middle College Charter High School |
RI | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Washington Yu Ying Public Charter School |
DC | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
MADS--Maximum annual debt service. DSC--Debt service coverage. |
Table 2
First-quarter 2024: U.S. charter schools outlook revisions | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Institution | State | Rating | Outlook to | Outlook from | Description | |||||||
American Heritage Charter Schools |
CA | BBB- | Stable | Negative | Improved financial operations, as the school successfully met funding determination requirements and renewals for full funding. | |||||||
Arizona Autism Charter Schools |
AZ | BB | Stable | Positive | Weakened pro forma financial metrics due to additional debt issuance. | |||||||
Avon Grove Charter School |
PA | BBB- | Negative | Stable | Additional debt plans that would triple the school's total debt outstanding with possible weakening of the credit profile. | |||||||
Community Leadership Academy |
CO | BB+ | Negative | Stable | Weakened financial profile following negative operating margins and MADS coverage of less than 1.0x in fiscal 2023, with similar expectations for fiscal 2024. | |||||||
Dr. Joseph F. Pollack Academic Center Of Excellence |
MI | BB | Negative | Stable | Enrollment declines that triggered an enrollment covenant violation, and weakened lease-adjusted MADS coverage in fiscal 2023. | |||||||
Excel Academy Charter School |
CO | BBB- | Negative | Stable | Consecutive years of enrollment declines in a competitive service area for students amid recent management turnover. | |||||||
Great Oaks Legacy Charter School |
NJ | BB+ | Stable | Positive | Modest financial performance and liquidity metics, coupled with anticipated debt plans for high school expansion. | |||||||
KIPP North Star Academy |
MN | BB- | Negative | Stable | Modest enrollment base that continues to shrink reflecting the school's weak market position. | |||||||
KIPP Philadelphia Charter School |
PA | BB+ | Negative | Stable | Weakened liquidity position and financial performance in fiscal 2023 leading to DSC and DCOH covenant violations. | |||||||
LEAP Academy University Charter School |
NJ | BB- | Positive | Stable | Improved liquidity and lease-adjusted MADS coverage, while sustaining a healthy enterprise profile despite challenging demographic trends. | |||||||
Noble Academy |
MN | BB | Positive | Stable | Robust cash position along with a trend of solid operations following recent school consolidation. | |||||||
Public Preparatory Charter Schools Academies |
NY | BBB | Watch Negative | Stable | Uncertainty surrounding the network's planned school consolidation beginning in fall 2024, amid enrollment declines and management turnover. | |||||||
ResponsiveEd |
TX | BBB | Stable | Positive | Softer operating results and lower lease-adjusted MADS coverage in fiscal 2023, with similar expectations in the near term. | |||||||
Vista College Preparatory |
AZ | BB+ | Positive | Stable | Successful opening of two additional schools in fall 2023 and improved financial metrics, which are expected to be sustained. | |||||||
MADS--Maximum annual debt service. DSC--Debt service coverage. DCOH--Days' cash on hand. |
Table 3
First-quarter 2024: U.S. charter schools maintained ratings | |||
---|---|---|---|
Institution | State | Rating | Outlook |
Advanced Technology Academy |
MI | BB+ | Stable |
Albert Einstein Academies |
CA | BB | Stable |
Avondale Meadows Academy |
IN | BB | Stable |
Brighter Choice Charter School |
NY | BB+ | Stable |
Caliber Public Schools |
CA | BBB- | Stable |
Collegium Charter School |
PA | BB | Stable |
Compass Academy Charter School |
TX | BBB- | Stable |
Discovery Charter School |
IN | BB- | Stable |
Doral Academy Charter School |
FL | BBB- | Positive |
First Philadelphia Preparatory Charter School |
PA | BB+ | Stable |
First State Montessori Academy |
DE | BBB- | Stable |
Granada Hills Charter School |
CA | BBB | Stable |
GreatHearts Arizona |
AZ | BBB | Stable |
Green Dot Public Schools |
CA | BBB- | Stable |
Hawthorn Academy |
UT | BBB | Stable |
Hennepin Schools |
MN | BB- | Stable |
Horizon Montessori Public Schools |
TX | BBB- | Stable |
IDEA Public Schools |
TX | A- | Negative |
Inner City Education Foundation (ICEF) Public Schools |
CA | BB | Negative |
John Adams Academy |
CA | BB | Stable |
Lake Norman Charter School |
NC | BBB- | Stable |
Noah Webster Academy |
UT | BBB- | Stable |
North Star Academy of Newark |
NJ | BBB- | Stable |
Nova Academy |
CA | BB | Stable |
Palm Beach School For Autism |
FL | BB+ | Stable |
Paterson Arts And Science Charter School |
NJ | BBB- | Stable |
Pine Lake Preparatory |
NC | BBB- | Stable |
Pinnacle Charter School |
CO | BBB- | Stable |
Renaissance Academy Charter School |
PA | BBB- | Stable |
Riverhead Charter School |
NY | BBB- | Stable |
Ser Ninos Charter School |
TX | BBB- | Stable |
Springfield International Charter School |
MA | BBB- | Stable |
St Croix Preparatory Academy |
MN | BB+ | Stable |
Texas Leadership Charter Academy |
TX | BB | Positive |
The Learning Choice Academy |
CA | BBB- | Stable |
Wallace Stegner Academy |
UT | BB+ | Stable |
West Philadelphia Achievement Charter Elementary School |
PA | BB- | Negative |
Related Research
- Economic Outlook U.S. Q2 2024: Heading For An Encore, March 26, 2024
- Charter School Brief: California, March 13, 2024
- Charter School Brief: Colorado, Feb. 26, 2024
- U.S. Charter Schools Rating Actions, 2023, Jan. 19, 2024
- U.S. Charter Schools 2024 Outlook: Credit Stability, For Now, Jan. 17, 2024
- U.S. Local Governments 2024 Outlook: Stimulus Shelters Governments In 2024; Preventing Long-Term Leaks Requires Fiscal Focus Now, Jan. 9, 2024
- U.S. States 2024 Outlook: Credit Stability Endures In Unstable Times, Jan. 4, 2024
- U.S. Public Finance 2023 Year In Review: Better Than Expected, Dec . 12, 2023
- U.S. Charter Schools Sector Fiscal 2022 Medians: Schools Hold Strong Amid Rising Costs, June 14, 2023
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, Phoenix + 1 (212) 438 1133; avani.parikh@spglobal.com | |
Secondary Contact: | Ryan Miller, Dallas +1 2148711408; ryan.miller@spglobal.com |
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