The Rating Outlook is Stable.
The bonds are payable by the foundation through lease payments received from
KEY RATING DRIVERS
STABLE OPERATIONS: The 'BBB' rating reflects BCA's 11-year operating history, with full and stable enrollment; consistently positive operating results; and adequate balance sheet resources. Counterbalancing credit factors include recent reductions in state per pupil funding levels and a high debt burden.
STEADY DEMAND: Student attrition resulting from periodic turnover of on-base military personnel is well managed and has not adversely impacted enrollment levels historically. Enrollment stability is further underpinned by the solid academic performance of BCA students.
HIGH, BUT MANAGEABLE BURDEN: Typical of charter schools, BCA maintains a high debt burden. However, this remains partially offset by the school's track record of over 1x pro forma MADS coverage from net operating income and adequate balance sheet cushion.
CHARTER RELATED CONCERNS: Substantial reliance on enrollment-driven, per pupil funding; and charter renewal risk are credit concerns common among all charter schools that, if pressured, could negatively impact the rating.
FEDERAL BUDGET: BCA's location on a military base makes it susceptible to decisions related to military staffing and location, including but not necessarily due to federal deficit reduction actions. However, Fitch does not presently anticipate any actions that would have a materially adverse impact on BCA's credit profile.
Opened in 2002, BCA serves grades K-8 and was the first charter school established on a military installation. Its initial five-year charter was granted in 2001 by the
OPERATIONS SUPPORTED BY ENROLLMENT STABILITY
BCA currently enrolls 936 students in grades K-8, down from 951 students at this time last year (
BCA generated operating surpluses for each of the past five fiscal years, with an average operating margin of 6.6%. Operations have been driven largely by stable enrollment and a relatively favorable funding environment. However, operating performance, while still solid, softened in fiscal 2013 with the school generating a 5.9% operating margin compared to 8.9% in fiscal 2012. The decline was due primarily to a fiscal 2013 reduction in state per student funding to
Management anticipates another operating surplus for fiscal 2014 but likely less than the fiscal 2013 level due to a further reduction in funding to
Other budgetary actions BCA can take to offset lower funding include adjusting staff headcount, adding students from its waiting list, and utilizing cash reserves, if needed. BCA has capacity to enroll up to 1,200 students under its existing charter, although it does not presently plan to grow to this level due to physical plant constraints and current staffing levels. Due to its high reliance on per student funding provided by the state (79% of fiscal 2013 operating revenues), Fitch continues to view enrollment stability as a key determinant of the Stable Rating Outlook.
ADEQUATE BALANCE SHEET CUSHION
BCA's balance sheet resources continue to provide an adequate financial cushion to manage unexpected increases in operating expenditures and/or decline in enrollment-related per pupil funding. Available funds (defined as cash and investments not permanently restricted) totaled
HIGH, BUT MANAGEABLE DEBT BURDEN
Pro forma debt service (
In addition, BCA generated sound MADS coverage from operations of over 1.5x in each of the past three fiscal years. For fiscal 2013, MADS coverage was a solid 1.6x based on net income available for debt service of
Additional information is available at 'www.fitchratings.com'.
--'Charter School Rating Criteria' (
--'Fitch Affirms Belle Chasse Academy (LA) at 'BBB' (
Charter School Rating Criteria
Tel: +1 212-908-0526
Source: Fitch Ratings
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