Click here to close now.

SYS-CON MEDIA Authors: David Sprott, Liz McMillan, Pat Romanski, Elizabeth White, tru welu

News Feed Item

Charter school financial performance exceeds market expectations, new LISC study finds

Report cites lack of industry disclosure and underwriting standards, emphasizes academic results as key indicator

NEW YORK, Nov. 15, 2012 /PRNewswire-USNewswire/ -- The tax-exempt bond market's first in-depth evaluation of charter school credit quality details stronger-than-expected financial performance, especially among rated borrowers, and challenges market perceptions about charter school financial risk.

The study—Charter School Bond Issuance: A Complete History, Volume 2—debunks some of the myths surrounding charter school finances, according to Reena Bhatia, vice president of education programs at the Local Initiatives Support Corporation (LISC), which released the study today.

"Charter schools had a surprisingly strong 10.9 percent median increase in net assets in 2011, despite a difficult budget environment and several years of cutbacks and freezes in per pupil funding for many," she said.

The study evaluated 2011 financial statements for 300 charter school borrowers and found their overall financial condition to be sound.  Debt ratios were superior to general market expectations, with a higher-than-expected median debt service coverage of 1.41x and a lower-than-expected median debt burden of 12.7 percent.  Across 22 different financial metrics, the data suggest healthy fiscal conditions.

Notably, academic performance proved to be a critical indicator of credit quality, though that data is often insufficient in charter offerings or misunderstood by the market.  The study found that poor academic performance was the primary cause of 73 percent of the defaults by borrowers in the sector, and a likely contributing factor in another 18 percent.  The study details ways to evaluate academic performance as part of an overall review of credit quality.

"Most defaults have occurred among schools with sub-par academic programs that compared poorly with other schools in their district and state," said Elise Balboni, one of the study's authors.  "Strong academics attract more students and the per pupil funding attached to them.  High-performing schools are unlikely to lose their charters, even in contentious districts.  In short, better academics make better borrowers."

Some of the study's other key findings include:

  • The tax-exempt charter school bond sector grew to approximately 600 transactions totaling $6.4 billion, as of May 31, 2012.
  • There were no monetary defaults on the 257 charter school bonds with investment grade ratings, one default among the 44 issues with non-investment grade ratings and 21 defaults among the 284 unrated issues.
  • Borrowing costs for charter schools have remained high since the credit crisis.  In fact, pricing spreads over AAA debt have been widening, averaging 341 basis points in 2011-12, despite the sector's fiscal health.
  • Lack of standardization in measuring charter school risk hampers growth of the sector and negatively affects repayment performance.  It discourages high-quality schools from turning to the capital markets for financing, inflates costs for all borrowers, and allows certain charter schools to borrow even though they are not strong enough—either academically or financially—to do so successfully.

Volume 2 is the second installment of LISC's comprehensive review of the charter school municipal bond market.  It evaluates offering documents, as well as the credit characteristics of charter school borrowers at the time of issuance, the current financial strength of bond-financed charter schools and repayment performance. The first volume of the study, Charter School Bond Issuance: A Complete History, was released in 2011 and catalogued the size, scope and pricing of charter school bond issues.

"This could be a large, high-performing market segment," Balboni said.  "But, less than 10 percent of charter schools are turning to the bond market for financing.  We need standardized disclosure and underwriting criteria for borrowers so that strong, credit-worthy charters can access the capital they need and this sector can achieve scale."  

The full study, which was funded with support from the Bill & Melinda Gates Foundation, is available at http://www.lisc.org/effc/bondhistoryv2.

About LISC

LISC combines corporate, government and philanthropic resources to help nonprofit community development corporations revitalize distressed neighborhoods.  Since 1980, LISC has raised $12 billion to build or rehab 289,000 affordable homes and develop 46 million square feet of retail, community and educational space.  For more information, visit www.lisc.org.

Contacts:
Elise Balboni
917.698.9960
[email protected]

SOURCE LISC

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
SYS-CON Events announced today that BMC will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. BMC delivers software solutions that help IT transform digital enterprises for the ultimate competitive business advantage. BMC has worked with thousands of leading companies to create and deliver powerful IT management services. From mainframe to cloud to mobile, BMC pairs high-speed digital innovation with robust...
2015 predictions circa 1970: houses anticipate our needs and adapt, city infrastructure is citizen and situation aware, office buildings identify and preprocess you. Today smart buildings have no such collective conscience, no shared set of fundamental services to identify, predict and synchronize around us. LiveSpace and M2Mi are changing that. LiveSpace Smart Environment devices deliver over the M2Mi IoT Platform real time presence, awareness and intent analytics as a service to local connecte...
High-performing enterprise Software Quality Assurance (SQA) teams validate systems that are ready for use - getting most actively involved as components integrate and form complete systems. These teams catch and report on defects, making sure the customer gets the best software possible. SQA teams have leveraged automation and virtualization to execute more thorough testing in less time - bringing Dev and Ops together, ensuring production readiness. Does the emergence of DevOps mean the end of E...
Amazon and Google have built software-defined data centers (SDDCs) that deliver massively scalable services with great efficiency. Yet, building SDDCs has proven to be a near impossibility for companies without hyper-scale resources. In his session at 15th Cloud Expo, David Cauthron, CTO and Founder of NIMBOXX, highlighted how a mid-sized manufacturer of global industrial equipment bridged the gap from virtualization to software-defined services, streamlining operations and costs while connect...
Container technology is sending shock waves through the world of cloud computing. Heralded as the 'next big thing,' containers provide software owners a consistent way to package their software and dependencies while infrastructure operators benefit from a standard way to deploy and run them. Containers present new challenges for tracking usage due to their dynamic nature. They can also be deployed to bare metal, virtual machines and various cloud platforms. How do software owners track the usag...
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, ...
paradigm shifts in networking, to cloud and licensure, and all the Internet of Things in between. In 2014 automation was the name of the game. In his session at DevOps Summit, Matthew Joyce, a Sales Engineer at Big Switch, will discuss why in 2015 it’s complexity reduction. Matthew Joyce, a sales engineer at Big Switch, is helping push networking into the 21st century. He is also a hacker at NYC Resistor. Previously he worked at NASA Ames Research Center with the Nebula Project (where OpenSta...
The term culture has had a polarizing effect among DevOps supporters. Some propose that culture change is critical for success with DevOps, but are remiss to define culture. Some talk about a DevOps culture but then reference activities that could lead to culture change and there are those that talk about culture change as a set of behaviors that need to be adopted by those in IT. There is no question that businesses successful in adopting a DevOps mindset have seen departmental culture change, ...
Discussions about cloud computing are evolving into discussions about enterprise IT in general. As enterprises increasingly migrate toward their own unique clouds, new issues such as the use of containers and microservices emerge to keep things interesting. In this Power Panel at 16th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists will address the state of cloud computing today, and what enterprise IT professionals need to know about how the latest topics and trends affec...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In this session, James Kirkland, Red Hat's Chief Architect for the ...
While there are hundreds of public and private cloud hosting providers to choose from, not all clouds are created equal. If you’re seeking to host enterprise-level mission-critical applications, where Cloud Security is a primary concern, WHOA.com is setting new standards for cloud hosting, and has established itself as a major contender in the marketplace. We are constantly seeking ways to innovate and leverage state-of-the-art technologies. In his session at 16th Cloud Expo, Mike Rivera, Seni...
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...
We’re entering a new era of computing technology that many are calling the Internet of Things (IoT). Machine to machine, machine to infrastructure, machine to environment, the Internet of Everything, the Internet of Intelligent Things, intelligent systems – call it what you want, but it’s happening, and its potential is huge. IoT is comprised of smart machines interacting and communicating with other machines, objects, environments and infrastructures. As a result, huge volumes of data are bein...
Cloud Expo, Inc. has announced today that Andi Mann returns to DevOps Summit 2015 as Conference Chair. The 4th International DevOps Summit will take place on June 9-11, 2015, at the Javits Center in New York City. "DevOps is set to be one of the most profound disruptions to hit IT in decades," said Andi Mann. "It is a natural extension of cloud computing, and I have seen both firsthand and in independent research the fantastic results DevOps delivers. So I am excited to help the great team at ...
EMC Corporation on Tuesday announced it has entered into a definitive agreement to acquire privately held Virtustream. When the transaction closes, Virtustream will form EMC’s new managed cloud services business. The acquisition represents a transformational element of EMC’s strategy to help customers move all applications to cloud-based IT environments. With the addition of Virtustream, EMC completes the industry’s most comprehensive hybrid cloud portfolio to support all applications, all workl...