During the third quarter of 2024 (July 1-Sept. 30), S&P Global Ratings changed its rating or revised the outlook on 11 U.S. charter schools, while assigning 11 new ratings and maintaining 39 ratings across the sector. The rating actions are broken out as follows:
These rating actions reflect a sector that continues to mature, characterized by growing demand, as evidenced by the high volume of new ratings we assigned. At the same time, some schools are experiencing operational challenges as the competition for students intensifies, and as Elementary and Secondary School Emergency Relief funds expired in September 2024. The one-time federal relief funds provided significant operating revenue to charter schools in recent years, leading to a difficult budgetary transition for those that didn't primarily use the funds for one-time expenses. As a result, year to date through the third quarter of 2024, S&P Global Ratings has lowered the ratings on 11 charter schools across its rated universe, with only four upgrades in the same period.
S&P Global Ratings revised four outlooks in the sector to positive from stable in the third quarter. These actions were mostly spurred by the schools' sustained trends of improved financial performance, including strengthened operating margins and growing levels of liquidity, while maintaining sound demand profiles.
In addition, we took seven negative rating actions across the sector during the quarter: two ratings were lowered and five had the outlook revised to negative (four from stable and one from CreditWatch with negative implications). These actions were primarily a result of continued enrollment declines and the aforementioned budgetary challenges these schools have experienced. Together, these issues caused financial stress that led to fiscal 2023 operating deficits, weakened liquidity, and lower maximum annual debt service (MADS) coverage metrics. In a few instances, these pressures triggered liquidity covenant violations, leading to heighted uncertainty regarding certain bondholder actions.
Along with the above rating actions, S&P Global Ratings assigned 11 new charter school ratings in the third quarter. The new issuers spanned the country, with ratings added in these seven states: California, Florida, Louisiana, Massachusetts, North Carolina, New York, and Texas. S&P Global Economics projects that the Federal Reserve could lower terminal rates to 3.0%-3.25% by the end of 2025, which could motivate a continued uptick in the number of charter schools that issue new debt. (See "Economic Outlook U.S. Q4 2024: Growth And Rates Start Shifting To Neutral," published Sept. 24, 2024, on RatingsDirect.)
The following tables summarize S&P Global Ratings' quarterly rating actions, outlook revisions, and unchanged ratings for U.S. charter schools and are based on its criteria, "U.S. Public Finance Charter Schools: Methodology And Assumptions," published Jan. 3, 2017.
Table 1
Third-quarter 2024: U.S. charter schools rating actions | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Institution | State | Rating to | Rating from | Outlook to | Outlook from | Rating action | Description | |||||||||
A.W. Brown Fellowship Charter School |
TX | B+ | - | - | - | Rating withdrawn | Rating withdrawn following school merging with IDEA Academy, which we currently rate "A-' with a negative outlook. | |||||||||
Ascend Public Charter Schools |
NY | BB+ | - | Stable | - | Rating initially assigned | New rating | |||||||||
Conservatory Lab Charter School Foundation |
MA | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Cornerstone Charter Academy |
NC | BBB- | - | Stable | - | Rating initially assigned | New rating | |||||||||
Durham Charter School |
NC | BB- | - | Stable | - | Rating initially assigned | New rating | |||||||||
Envision Education Inc. |
CA | BB+ | - | Stable | - | Rating initially assigned | New rating | |||||||||
Etoile Academy Charter School |
TX | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Kenilworth Science & Technology Charter School |
LA | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Lake Charles Charter Academy Foundation |
LA | BB+ | - | Stable | - | Rating initially assigned | New rating | |||||||||
Mason Classical Academy |
FL | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Navigator Academy Of Leadership Inc. |
FL | BB | - | Stable | - | Rating initially assigned | New rating | |||||||||
Noah Webster Basic School |
AZ | BB- | BB | Negative | Negative | Rating lowered | Continued trend of material enrollment declines resulting in a worsening liquidity position. | |||||||||
Urban Discovery Academy |
CA | B+ | BB- | Negative | Negative | Rating lowered | Signficant enrollment declines leading to materially weaker liquidity position and expectations for a full-accrual operating deficit in fiscal 2024. | |||||||||
Zeta Charter Schools |
NY | BB+ | - | Stable | - | Rating initially assigned | New rating | |||||||||
Source: S&P Global Ratings. |
Table 2
Third-quarter 2024: U.S. charter schools outlook revisions | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Institution | State | Rating | Outlook to | Outlook from | Description | |||||||
Academy of Accelerated Learning |
TX | BBB- | Negative | Stable | Negative enrollment trends leading to a deterioration of operating results and liquidity metrics. | |||||||
Global Leadership Academy Charter School |
PA | BB- | Negative | Credit Watch Negative | Trend of deficit operations and slim liquidy position leading to covenant violations in fiscal 2023. | |||||||
Hmong American Peace Academy |
WI | BBB | Positive | Stable | Strengthening financial profile supported by trend of solid operating margins, MADS coverage, and a robust liquidity position. | |||||||
KIPP Nashville |
TN | BBB | Positive | Stable | Steady enrollment growth and sustained financial performance supportive of a stronger liquidity position. | |||||||
Little Scholars Of Arkansas Foundation (LISA Academy) |
AR | BB+ | Negative | Stable | Weakened operating performance in fiscal 2023 leading to materially lower MADS coverage and declining unrestricted reserves. | |||||||
North Star Academy Charter School Of Newark |
NJ | BBB- | Positive | Stable | Enrollment growth resulting in operational stability, improving liquidity, and a moderating debt profile. | |||||||
Odyssey Academy Inc. |
TX | BB | Negative | Stable | Financial pressures leading to expected liquidity covenant violation in fiscal 2024. | |||||||
Old Redford Academy |
MI | BB- | Negative | Stable | Continued enrollment declines creating near-term budgetary pressures. | |||||||
Rocklin Academies |
CA | BB+ | Positive | Stable | Strengthening financial profile supported by solid operating performance and improved liquidty ratios. | |||||||
MADS--Maximum annual debt service. Source: S&P Global Ratings. |
Table 3
Third-quarter 2024: U.S. charter schools maintained ratings | |||
---|---|---|---|
Institution | State | Rating | Outlook |
A+ Charter School Inc. |
TX | BBB- | Stable |
Academia Cesar Chavez |
MN | BB | Stable |
Academies of Math and Science |
AZ | BB+ | Stable |
Alma del Mar Charter School |
MA | BB | Stable |
Ball Charter Schools |
AZ | BBB- | Stable |
Ben Franklin Academy |
CO | BBB- | Stable |
Campus Community School |
DE | BBB- | Stable |
Castle Rock Lifelong Learning Center |
CO | BBB | Stable |
Cheyenne Mountain Charter Academy |
CO | BBB- | Stable |
Classical Charter Schools |
NY | BBB- | Stable |
DaVinci Academy of Science |
UT | BBB- | Stable |
Dream Charter School |
NY | BB+ | Stable |
Equitas Academy Charter School |
CA | BB+ | Stable |
Grand Concourse Academy Charter School |
NY | BBB- | Stable |
Holly Academy |
MI | BB+ | Stable |
Independence Academy |
CO | BBB- | Stable |
James Irwin Charter Schools |
CO | BBB | Stable |
Jubilee Academic Center Inc. |
TX | BB+ | Stable |
Julian Charter School |
CA | B+ | Stable |
KIPP DC |
DC | BBB+ | Stable |
Lake Norman Charter School |
NC | BBB- | Stable |
Legacy Preparatory Academy |
UT | BBB- | Stable |
Life School of Dallas |
TX | BBB- | Stable |
Mater Academy Of Nevada |
NV | BB | Stable |
Milwaukee Academy of Science |
WI | BBB- | Stable |
Monument Academy |
CO | BB | Negative |
Mountain Island Charter School |
NC | BBB- | Stable |
North Star Academy |
CO | BBB- | Stable |
Renaissance Public School Academy |
MI | BB+ | Stable |
Sage International School of Boise |
ID | BB+ | Stable |
Spectrum High School |
MN | BB+ | Stable |
STEM Preparatory Schools |
CA | BBB- | Stable |
Tapestry Charter School |
NY | BB+ | Stable |
The Higher Ground Academy |
MN | BB+ | Stable |
University Laboratory School |
CO | BBB- | Stable |
Uplift Education Inc. |
TX | BBB- | Stable |
Venture Academy |
UT | BBB- | Stable |
Wasatch Peak Academy |
UT | BBB- | Stable |
Woodbury Leadership Academy |
MN | BB- | Stable |
Related Research
- Charter School Brief: Texas, Oct. 17, 2024
- Economic Outlook U.S. Q4 2024: Growth And Rates Start Shifting To Neutral, Sept. 24, 2024
- U.S. Charter Schools Rating Actions, Second-Quarter 2024, July 16, 2024
- U.S. Charter Schools Sector Fiscal 2023 Medians: Healthy Financial Metrics Amid Looming Fiscal Cliff, June 25, 2024
- U.S. State Enhancement Programs And Their Impact on Charter Schools, May 7, 2024
- U.S. Charter Schools Rating Actions, First-Quarter 2024, April 15, 2024
- U.S. Charter Schools 2024 Outlook: Credit Stability, For Now, Jan. 17, 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 |
Luke J Gildner, Columbia + 1 (303) 721 4124; luke.gildner@spglobal.com |
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