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Table Of Contents: S&P Global Ratings Credit Rating Models


U.S. Charter School Rating Actions, First-Quarter 2024

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:

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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

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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