The Rating Outlook is Stable.
The bonds are secured by rental payments made by
KEY RATING DRIVERS
STRONG OPERATIONAL/FINANCIAL MANAGEMENT: Fitch views Aspire's operational and financial management practices as strong. Academic performance for most of the bond schools is at or above state expectations, and in fiscal 2013 each school generated a modest operating surplus on a full accrual basis.
LIMITED OPERATING HISTORY: Four of the 10 bond schools have been in operation less than five years, and one has not gone through its first charter renewal process. Under Fitch's charter school rating criteria, this precludes those schools from being included in debt service coverage calculations.
FINANCIAL METRICS REMAIN SPECULATIVE: Despite effective leadership and policies, balance sheet metrics for the 10 bond schools and the consolidated Aspire organization remain very limited. Transaction maximum annual debt service coverage (TMADS), as adjusted per Fitch's criteria, was positive.
WEAK BALANCE SHEET AND LIMITED DIVERSITY: Weak balance sheet strength for the bond schools - which largely comes from consolidated Aspire operations, could create rating pressures. There is some philanthropic support which adds revenue diversity, although this is mostly at the consolidated Aspire level.
OPERATING PERFORMANCE: Weakened TMADS coverage from the bond schools due to enrollment declines or state per pupil funding reductions could create rating pressures.
STANDARD CHARTER RENEWAL RISK: A limited financial cushion; substantial reliance on enrollment-driven, per-pupil funding; and charter renewal risk are credit concerns common in all charter school transactions which, if pressured, could negatively impact the rating over time.
Aspire is a non-profit public-benefit corporation that operates 37 charter schools, mainly in
In response to a 2012 decision by the
POSITIVE ENROLLMENT AND DEMAND TRENDS
As of fall 2013, Aspire enrolled approximately 4,073 students at the 10 bond schools, an annual increase of about 2%. As in the past several years, this pace exceeds Aspire's base-case forecast for the bond schools. Demand for an Aspire education remains robust, as evidenced by waitlists at the bond schools exceeding 3,300 in fall 2013 (fiscal 2014).
Positive academic results also drive student demand. In academic year 2012/2013, four schools failed to meet the state API growth target (Aspire Golden State, Aspire Langston Hughes,
IMPROVING FINANCIAL PERFORMANCE
State funding, tied primarily to enrollment, remains the bond schools' primary revenue stream. For fiscal 2013, Fitch calculated a positive 9.2% operating margin for the bond schools based on unaudited consolidated financials provided by Aspire. This compares to 3.6% in fiscal 2012. Management attributes the stronger operating performance to increased state per-pupil funding, conservative budgeting, and stable to growing enrollment.
Under Fitch's charter school criteria, Fitch adjusts the debt service coverage calculation to exclude any charter school that has an operating history of less than five years. Such schools are deemed speculative grade under this criteria. Four of the 10 bond schools (
HIGH DEBT BURDEN
On a consolidated basis, TMADS burden remains high. In fiscal 2013, TMADS of
SLIM BALANCE SHEET
Aspire's balance sheet cushion (defined as available funds [AF], or unrestricted cash and investments) at the end of fiscal 2013, on both a bond school and Aspire consolidated basis, remains very light. There was essentially no AF recorded at the charter school level, and
Proposition 30 revenues led to per-pupil funding improvement in fiscal 2013. While this supported stronger TMADs coverage levels, Fitch expects increases in reserves to be relatively modest. Liquidity risk remains a credit concern, as is the case for nearly all Fitch-rated charter schools.
Effective for the 2013/2014 academic year, the bond schools now operate under charters with five different local school district authorizers. Fitch communicated with all five authorizers, who reported that the bond schools and Aspire were cooperative in their oversight process and in compliance with charter requirements. These authorizers reported no outstanding issues threatening the charters at this time.
Additional information is available at 'www.fitchratings.com'
--'Charter School Rating Criteria' (
Charter School Rating Criteria
Source: Fitch Ratings
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