Fitch Ratings has affirmed the 'BBB' rating on the The Rating Outlook is Stable.
The bonds are secured by a gross revenue pledge and a leasehold mortgage over the school's facility. Additional security is provided by a cash-funded debt service reserve fund, a supplemental debt service reserve fund, and an intercept mechanism that directs state and federal funds directly to the trustee prior to being made available to the school for operations.
KEY RATING DRIVERS
STABLE CREDIT CHARACTERISTICS: The 'BBB' rating primarily reflects a track-record of consistently positive GAAP-based financial results; healthy demand profile, which encompasses stable enrollment trends and an actively managed waiting list; favorable leverage position; and long operating history with a track-record of multiple charter renewals.
HISTORY OF POSITIVE OPERATING PERFORMANCE: PCS registered its sixth consecutive positive operating margin in fiscal 2013, reflecting prudent fiscal management and stable enrollment trends. While a strategic reduction in student enrollment for fall 2013 has reduced total operating revenues in fiscal 2014, proactive budgetary adjustments and careful expense management is expected to support satisfactory year-end operating performance.
MANAGEABLE LEVERAGE POSITION: The school's debt burden, which ranks among the lowest of all charter school's rated by Fitch, is regularly covered by at least two times (x) from net operating income. There are no concrete new money debt plans over the near term.
STANDARD SECTOR CONCERNS: A modest financial cushion; substantial reliance on enrollment-driven, per pupil funding; and charter renewal risk are credit concerns common among all charter school transactions that, if pressured, could negatively impact the rating over time.
DEBT MANAGEABILITY: While not expected at the present time, any material, adverse change in the school's leverage metrics could yield negative rating pressure.
Established in 2000, PCS is located in the city of
HISTORY OF POSITIVE OPERATING PERFORMANCE
PCS' GAAP-based operating performance has been consistently positive over the past five fiscal years (2009-2013), averaging 5.3 percent inclusive of a 7.7 percent margin in fiscal 2013. Favorable year-over-year financial results on a full accrual basis are supported by prudent financial planning, which includes conservative per pupil funding forecasts, careful expense management, and multi- year forecasting.
Positive operating performance has driven continued growth in the school's unencumbered financial resources. PCS' available funds, defined by Fitch as unrestricted cash and investments, increased from
Nearly all of PCS' revenues are tied to student enrollment, which underscores the importance of maintaining healthy student demand and steady headcount trends. PCS' student demand is supported by its favorable academic performance on standardized state exams relative to the local school district (
Following some enrollment growth in recent years to help offset a pressured state funding environment (Missouri GO bonds are rated 'AAA' with a Stable Outlook by Fitch), management made the strategic decision to reduce total headcount enrollment to 899 in academic year 2013-14 (from 968 in 2012-13) and is intent on maintaining this level for the next few years. The objective behind management's decision to decrease headcount enrollment is to positively impact student outcomes by reducing the student-teacher ratio. While the enrollment reduction will decrease total operating revenues in fiscal year-end 2014, proactive budgetary adjustments and careful expense management is expected to help the school maintain satisfactory operating results. Importantly, despite the near-term revenue loss, Fitch notes that capacity for enrollment growth affords the school additional financial flexibility in future years.
MANAGEABLE LEVERAGE POSITION
PCS' series 2002A bonds are structured such that annual debt service is approximately
In calculating leverage ratios, Fitch considers transactional MADS debt burden and coverage, or MADS adjusted for the DSRF. PCS' transactional MADS of
Additional information is available at 'fitchratings.com'
--'Charter School Rating Criteria', dated
--'Fitch Upgrades St. Louis Charter School (MO) to 'BBB', dated
Charter School Rating Criteria
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Fitch Ratings has affirmed the 'BBB' rating on the
The Rating Outlook is Stable.