During the second quarter of 2024 (April 1 to June 30), S&P Global Ratings changed its rating or revised the outlook on 12 U.S. charter schools while assigning one new rating and maintaining 42 ratings across the sector. The 13 rating actions are broken out as follows:
In June, we published "U.S. Charter Schools Sector Fiscal 2023 Medians: Healthy Financial Metrics Amid Looming Fiscal Cliff" (June 25, 2024, on RatingsDirect), which highlights a variety of factors that led to the median financial metrics for our rated universe of charter schools in fiscal 2023. Overall, our latest medians indicate that financial performance remained healthy for charter schools in fiscal 2023, with stable-to-improving metrics across most measures relative to fiscal 2022. This was driven by material growth to the median enrollment for our rated universe and by more substantial increases in state per-pupil funding received by charter schools in states where we have rated schools. The report also discusses the trends most influencing charter schools during calendar 2024 and what we will be watching in the sector going forward.
S&P Global Ratings took five positive rating actions in second-quarter 2024, raising one rating as well as revising four outlooks, three to positive from stable and one to stable from negative. These actions were mostly spurred by sustained trends of improved financial performance, including strengthened operating margins and growing levels of liquidity, as well as by sound demand profiles.
The first half of 2024 saw an uptick in covenant violations, reflected in our second-quarter negative rating actions, as a result of operating challenges that led to fiscal 2023 financial deficits, weakened liquidity, and lower MADS coverage. In a few instances these pressures triggered technical covenant violations, leading to heighted uncertainty regarding certain bondholder actions as well as possible further ramifications from management organizations or authorizer for the schools involved. A couple of the negative rating actions occurred following the issuance of new debt that significantly increased the amount of leverage on the affected schools' balance sheets.
Together, these pressures resulted in seven negative rating actions across the sector during the quarter, one downgrade and six negative outlook revisions (two to stable from positive, one from stable to negative, two placed on CreditWatch with developing implications, and one placed on CreditWatch with negative implications).
In addition to the positive and negative rating actions, during the second quarter S&P Global Ratings added one new charter school rating, for an issuer based in Arizona, and withdrew the rating on Plymouth Educational Center Charter School, Mich. when the school closed.
The following tables summarize S&P Global Ratings' quarterly rating actions, outlook revisions, and unchanged ratings for U.S. charter schools. These are based on our "U.S. Public Finance Charter Schools: Methodology And Assumptions" criteria, published Jan. 3, 2017.
Table 1
Second-Quarter 2024: U.S. Charter Schools Rating Actions | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Institution | State | Rating to | Rating from | Outlook to | Outlook from | Rating action | Description | |||||||||
Champion Schools Inc. | AZ | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Legacy Traditional School | AZ | BBB- | BB+ | Stable | Positive | Rating raised | Robust enrollment base, improved financial performance, and growing liquidity position. | |||||||||
Plymouth Educational Center Charter School | MI | - | D | - | - | Rating withdrawn | Rating withdrawn due to school closing. | |||||||||
Public Preparatory Charter Schools Academies | NY | BB | BBB | Negative | CW Negative | Rating lowered | Significant and unexpected increase in pro forma lease-adjusted debt in fiscal 2023 translating to pro forma MADS coverage below 1x, along with the network's significant enrollment declines in recent years leading to the consolidation of schools. | |||||||||
MADS: Maximum annual debt service. |
Table 2
Second-Quarter 2024: U.S. Charter Schools Outlook Revisions | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Institution | State | Rating | Outlook to | Outlook from | Description | |||||||
21st Century Charter School Of Gary | IN | B+ | CW Developing | Stable | Uncertainty regarding negotiations related to a limited forbearance agreement between 21st Century, its management organization, and the bondholders of its series 2013A debt. | |||||||
A.W. Brown Leadership Academy | TX | B+ | CW Developing | Negative | Announcement that the school will surrender its charter to the state authorizer and stop operating under its current organization structure. | |||||||
Academic Leadership Charter School | NY | BBB- | Negative | Stable | Weakening demand profile in highly competitive market for students and expecations of more modest near-term financial performance. | |||||||
Basis Schools, Inc. | AZ | BB | Positive | Stable | Consistently strong academic and demand metrics and improving operating performance leading to a reduction in negative unrestricted net assets. | |||||||
Channing Hall Charter School | UT | BB | Positive | Stable | An improved financial profile led by a growing liquidity position and a moderating debt burden. | |||||||
Global Leadership Academy Charter School | PA | BB- | CW Negative | Stable | Trend of deficit operations resulting in DCOH and DSC covenant violations leading to short-term uncertainty regarding bondholder actions. | |||||||
Mater Academy Of Nevada, Inc. | NV | BB- | Stable | Positive | Weakened liquidity position and uneven financial performance in recent years, despite fiscal 2023 negative operating margins being attributable to timing issues with grants. | |||||||
Universal Academy | TX | BB- | Stable | Negative | Improved operating margins and favorable changes to management's growth strategy. | |||||||
Valor Collegiate Academies | TN | BBB- | Positive | Stable | Improved financial performance, growing liquidity, and moderating debt combined maintenance of a strong enterprise profile. | |||||||
Victory Charter School | ID | BBB- | Stable | Positive | Increased debt burden following issuing new debt and expectations of more modest MADS coverage in the near term. | |||||||
MADS: Maximum annual debt service. DSC: Debt service coverage. DCOH: Days' cash on hand. |
Table 3
Second-Quarter 2024: U.S. Charter Schools Maintained Ratings | |||
---|---|---|---|
Institution | State | Rating | Outlook |
Acero Charter School | IL | BB+ | Stable |
Athenian eAcademy | UT | BB | Stable |
Beatrice Mayes Institute | TX | BBB- | Stable |
Chicago Charter School Foundation | IL | BBB | Stable |
Cityscape Schools Inc | TX | BBB- | Stable |
Community Of Peace Academy | MN | BBB- | Stable |
Cornerstone Schools | FL | BB+ | Stable |
Dayspring Academy For Education And Arts | FL | BB | Stable |
Eleanor Kolitz Hebrew Language Academy | TX | BBB- | Stable |
Foundation Academy Charter School | NJ | BBB- | Stable |
Freire Charter School Wilmington | DE | BB | Stable |
Friends of Teaneck Community Charter School | NJ | BB | Stable |
Friendship Public Charter School, Inc. | DC | BBB | Stable |
Global Academy Inc. | MN | BB | Stable |
Harmony Public Schools | TX | BBB+ | Stable |
Hawking STEAM Charter School | CA | BB+ | Stable |
Horizon Community Learning Center | AZ | BB+ | Stable |
Hughen Center Inc d/b/a Bob Hope Charter School | TX | BBB- | Stable |
Idaho Arts Charter School | ID | BBB- | Stable |
IDEA Public Schools | TX | A- | Negative |
KIPP Capital Region | NY | BBB- | Stable |
KIPP NYC | NY | BBB- | Stable |
Lifeline Education Charter School | CA | BB+ | Stable |
Lincoln Academy | UT | BBB- | Stable |
Magnolia Science Academy 1 | CA | BB | Stable |
Mountainville Academy | UT | BBB- | Stable |
New Designs Charter School | CA | BB+ | Stable |
Newark Charter School | DE | BBB+ | Stable |
Palmetto Scholars Academy | SC | BB | Negative |
Peak To Peak Charter School | CO | BBB+ | Stable |
Philadelphia Electrical And Technology Charter High School | PA | BB | Stable |
Platte River Academy Charter School | CO | BBB- | Stable |
Renaissance Arts Academy | CA | BBB- | Stable |
Rocklin Academies | CA | BB+ | Stable |
Ronald Wilson Reagan Academy | UT | BB | Stable |
Seton Education Partners o/b/o Brilla Public Preparatory Charter Schools | NY | BB+ | Stable |
Somerset Academy of Las Vegas | NV | BB | Stable |
Syracuse Arts Academy | UT | BBB- | Stable |
Triad Math and Science Academy | NC | BBB- | Stable |
Twin Peaks Charter Academy | CO | BB | Stable |
Value Schools | CA | BBB- | Stable |
Western Academy Charter School | FL | BB | Stable |
Related Research
- Through The ESG Lens 3.0: The Intersection Of ESG Credit Factors And U.S. Public Finance Credit Factors, March 2, 2022
- U.S. Charter Schools 2024 Outlook: Credit Stability, For Now, Jan. 17, 2024
- Charter School Brief: Colorado, Feb. 26, 2024
- Charter School Brief: California, March 13, 2024
- U.S. Charter Schools Rating Actions, First-Quarter 2024, Apr. 15, 2024
- Charter School Brief: North Carolina, Apr. 23, 2024
- U.S. State Enhancement Programs And Their Impact on Charter Schools, May 7, 2024
- Economic Outlook U.S. Q3 2024: Milder Growth Ahead, June 24, 2024
This report does not constitute a rating action.
Primary Credit Analyst: | Ryan Miller, Dallas +1 2148711408; ryan.miller@spglobal.com |
Secondary Contacts: | Jessica L Wood, Chicago + 1 (312) 233 7004; jessica.wood@spglobal.com |
Avani K Parikh, Phoenix + 1 (212) 438 1133; avani.parikh@spglobal.com |
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