Welcome!

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
Internet-of-Things discussions can end up either going down the consumer gadget rabbit hole or focused on the sort of data logging that industrial manufacturers have been doing forever. However, in fact, companies today are already using IoT data both to optimize their operational technology and to improve the experience of customer interactions in novel ways. In his session at @ThingsExpo, Gordon Haff, Red Hat Technology Evangelist, will share examples from a wide range of industries – includin...
"We build IoT infrastructure products - when you have to integrate different devices, different systems and cloud you have to build an application to do that but we eliminate the need to build an application. Our products can integrate any device, any system, any cloud regardless of protocol," explained Peter Jung, Chief Product Officer at Pulzze Systems, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
@DevOpsSummit at Cloud taking place June 6-8, 2017, at Javits Center, New York City, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long developm...
"We are an all-flash array storage provider but our focus has been on VM-aware storage specifically for virtualized applications," stated Dhiraj Sehgal of Tintri in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Between 2005 and 2020, data volumes will grow by a factor of 300 – enough data to stack CDs from the earth to the moon 162 times. This has come to be known as the ‘big data’ phenomenon. Unfortunately, traditional approaches to handling, storing and analyzing data aren’t adequate at this scale: they’re too costly, slow and physically cumbersome to keep up. Fortunately, in response a new breed of technology has emerged that is cheaper, faster and more scalable. Yet, in meeting these new needs they...
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
When it comes to cloud computing, the ability to turn massive amounts of compute cores on and off on demand sounds attractive to IT staff, who need to manage peaks and valleys in user activity. With cloud bursting, the majority of the data can stay on premises while tapping into compute from public cloud providers, reducing risk and minimizing need to move large files. In his session at 18th Cloud Expo, Scott Jeschonek, Director of Product Management at Avere Systems, discussed the IT and busin...
According to Forrester Research, every business will become either a digital predator or digital prey by 2020. To avoid demise, organizations must rapidly create new sources of value in their end-to-end customer experiences. True digital predators also must break down information and process silos and extend digital transformation initiatives to empower employees with the digital resources needed to win, serve, and retain customers.
The IoT is changing the way enterprises conduct business. In his session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, discussed how businesses can gain an edge over competitors by empowering consumers to take control through IoT. He cited examples such as a Washington, D.C.-based sports club that leveraged IoT and the cloud to develop a comprehensive booking system. He also highlighted how IoT can revitalize and restore outdated business models, making them profitable ...
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
SaaS companies can greatly expand revenue potential by pushing beyond their own borders. The challenge is how to do this without degrading service quality. In his session at 18th Cloud Expo, Adam Rogers, Managing Director at Anexia, discussed how IaaS providers with a global presence and both virtual and dedicated infrastructure can help companies expand their service footprint with low “go-to-market” costs.
Get deep visibility into the performance of your databases and expert advice for performance optimization and tuning. You can't get application performance without database performance. Give everyone on the team a comprehensive view of how every aspect of the system affects performance across SQL database operations, host server and OS, virtualization resources and storage I/O. Quickly find bottlenecks and troubleshoot complex problems.
"Once customers get a year into their IoT deployments, they start to realize that they may have been shortsighted in the ways they built out their deployment and the key thing I see a lot of people looking at is - how can I take equipment data, pull it back in an IoT solution and show it in a dashboard," stated Dave McCarthy, Director of Products at Bsquare Corporation, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
"We are the public cloud providers. We are currently providing 50% of the resources they need for doing e-commerce business in China and we are hosting about 60% of mobile gaming in China," explained Yi Zheng, CPO and VP of Engineering at CDS Global Cloud, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.