Sector Profiles
Charter Schools
ACA Capital insures bonds issued for Charter Schools. In doing so, particular attention is paid to the charter authorization review and renewal process under which every school must operate. ACA Capital is mindful that each state’s charter school program was developed within different legal and political constraints, making each state’s authorization and review process unique.
Key Credit Factors
In order to make a preliminary determination of insurability, ACA Capital will review the Charter School for the following key characteristics:
- Historic and current enrollment that totals at least 500 students, including evidence of sustainable future demand
- Terms of charter should be at least five years
- Charter School should have an operating history at least equal to its initial charter term
- A history of satisfactory financial performance
- Measurable success in academic programs
- Evidence of managerial skills necessary for the efficient operation of the Charter School
Key Legal and Covenant Provisions
Typical security and covenant provisions for ACA Capital insured Charter School financings include the following:
- Gross revenue pledge including accounts receivable with direct payments of state aid into a lock-box held by the bond trustee
- First mortgage
- Fully funded debt service reserve
- Rate covenant of 1.25x Maximum Annual Debt Service
- Change of control is subject to ACA Capital consent
- Liquidity reserves funded at a level acceptable to ACA Capital
Essential Documentation
The following information is essential for an ACA Capital review of a proposed Charter School financing:
- Preliminary official statement (if available) and legal documents
- Statement of sources and uses
- Five years of audited and current interim financial statements or shorter period, if acceptable to ACA
- Five years of enrollment statistics, projected enrollment, and information regarding faculty credentials and staff tenure, if acceptable to ACA
- Data demonstrating satisfactory academic achievement
- Projected financials demonstrating ability to service debt
- Management experience and succession planning
