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U.S. Charter Schools Rating Actions, Third-Quarter 2024

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:

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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

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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