THE NEW JERSEY ECO­NOMIC

The Bond Buyer - - Front Page - BY AN­DREW COEN

De­vel­op­ment Au­thor­ity is is­su­ing $24.7 mil­lion of se­ries 2017 rev­enue bonds Thurs­day for NSA 18th Av­enue LLC on be­half of North Star Academy Char­ter School of Ne­wark.

A rare New Jersey char­ter school deal hits the mar­ket this week.

The New Jersey Eco­nomic De­vel­op­ment Au­thor­ity is is­su­ing $24.7 mil­lion of se­ries 2017 rev­enue bonds Thurs­day for NSA 18th Av­enue LLC on be­half of North Star Academy Char­ter School of Ne­wark.

NSA 18th Av­enue, a sin­gle-pur­pose New Jersey lim­ited li­a­bil­ity com­pany, plans to use the bond pro­ceeds to fund ren­o­va­tions at the 20-year old school and a 47,160 square-foot ex­pan­sion. The ne­go­ti­ated deal is led by sole man­ager Ge­orge K. Baum & Com­pany with Chiesa Shahinian & Giantomasi PC as bond coun­sel.

S&P Global Rat­ings as­signed its BBB-mi­nus rat­ing, cit­ing the school’s “vul­ner­a­ble” fi­nan­cial pro­file that in­cludes lim­ited days’ cash on hand that is off­set by past con­sis­tent op­er­at­ing per­for­mances. The bonds are se­cured by lease pay­ments from North Star to NSA 18thAv­enue, a mort­gage on the fi­nanced prop­er­ties and a debt ser­vice re­serve fund.

Through the end of Septem­ber, New Jersey char­ter schools have ac­cessed the tax-ex­empt bond mar­ket through 13 trans­ac­tions since 2003 to­tal­ing roughly $148.5 mil­lion, ac­cord­ing to Wendy Berry, di­rec­tor and lead ed­u­ca­tion an­a­lyst at NewOak. New Jersey laws gov­ern­ing char­ter schools are stricter than most states. The re­newal process in­cludes bench­mark tar­gets for each char­ter school that if not met could re­sult in a re­vo­ca­tion at the end of its term.

Na­tion­ally, Berry said the pace for char­ter school bond is­suance is on track to fall just short of last year when vol­ume rose for a fifth straight year to $2.8 bil­lion, but that de­mand is still strong with a large pipeline. She said in­vestor in­ter­est has been aided by cer­tain states like Colorado, Utah, Texas and Ari­zona in­sti­tut­ing credit en­hance­ment pro­grams for char­ter school bonds the last four years that pro­vide a A-level rat­ings on some deals.

“You now have a broad range of rat­ings,” said Berry. “You have a lot of re­tail at the higher rat­ing lev­els so there is more de­mand there.”

Berry noted that while only 5% of all pub­lic school stu­dents at­tend char­ter school, the story is far dif­fer­ent in some cities.

New Or­leans has the largest char­ter school mar­ket share at 92% fol­lowed by more than 50% in Detroit and Flint, Mich. Wash­ing­ton, D.C. and Kansas City, Mo. also have large char­ter school en­roll­ment at 45% and 43%, re­spec­tively.

S&P credit an­a­lyst Jes­sica Mat­sumori said in a Jan­uary re­port that the out­look for char­ter school bonds was sta­ble in 2017 thanks in large part to in­creased de­mand for high-yield pa­per.

She cau­tioned though that while the num­ber of stu­dents at­tend­ing char­ter schools is in­creas­ing, the sec­tor’s growth is a credit neg­a­tive for ex­ist­ing schools.

Five states ac­counted for 60% of char­ter school bond vol­ume from 1998 through 2016, ac­cord­ing to NewOak data: Texas, Ari­zona, Colorado, Cal­i­for­nia and Florida.

Char­ter schools in 31 states have ac­cessed the mu­nic­i­pal mar­ket in the last two decades. ◽

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.