During the first quarter of 2023, S&P Global Ratings changed its rating or revised the outlook on 11 U.S. charter schools, while two ratings were initially assigned, and 40 ratings were unchanged across the sector. The 13 rating actions are broken out as follows.
In January, we published our "Outlook for Charter Schools: Credit Profiles Hold Steady," which highlighted factors that will likely influence the charter schools sector in 2023. In the article, we discuss the positive impact of healthy demand; still-ample federal stimulus that is providing financial flexibility; and how state funding remaining stable, at least for now, has supported overall stability across the sector. However, we also speak to risks related to staffing shortages, inflation, and how COVID-19 pandemic-related learning loss has negatively affected state testing results. S&P Global Ratings also published "U.S. Charter Schools Rating Actions, 2022," reflecting all rating actions in the charter school sector for last year. For the second consecutive year, upgrades outpaced downgrades among charter schools rated by S&P Global Ratings. This is noteworthy since 2021 was the first time in 10 years that this occurred, and because this favorable trend seems to have carried into 2023 so far as well.
The seven positive rating actions taken during the first quarter reflect a solid start to 2023. We raised six ratings during the first quarter, and revised one outlook to stable from negative. These positive rating actions can be attributed to healthy demand and growing reserves, resulting in robust liquidity positions and improved financial operations.
S&P Global Ratings took four negative rating actions during the quarter; three were downgrades, and one was a negative outlook revision. These actions were mostly spurred by deteriorating operating performance, leading to weakened financial metrics, putting greater pressure on the ability of these issuers to make bond payments, and meet other debt service requirements.
In addition, S&P Global Ratings added two new public charter school ratings in the first quarter of 2023, one in California and one in New York.
The following tables summarize S&P Global Ratings' quarterly rating actions, outlook revisions, and unchanged ratings for U.S. charter schools. The rating actions, outlook revisions, and unchanged ratings are based on our "U.S. Public Finance Charter Schools: Methodology And Assumptions" criteria, published Jan. 3, 2017.
Table 1
| First-quarter 2023 U.S. charter schools rating actions | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Institution | State | Rating to | Rating from | Outlook to | Outlook from | Rating action | Description | |||||||||
| Camino Nuevo Charter Academy | CA | BBB- | - | Stable | - | Rating assigned | New rating | |||||||||
| Classical Charter Schools | NY | BBB- | - | Stable | - | Rating assigned | New rating | |||||||||
| Detroit Serving Learning Academy | MI | BB | BB- | Positive | Stable | Rating raised | Sustained trend of solid operating margins and coverage as well as growing liquidity. | |||||||||
| Doral Academy of Nevada | NV | BBB- | BB+ | Stable | Stable | Rating raised | Solid MADS coverage, liquidity, and positive enrollment trend in recent years. | |||||||||
| Golden Rule Schools Inc. | TX | BB+ | BBB- | Stable | Stable | Rating lowered | Softening demand and weakened financial profile, with declining liquidity, slim margins and thin MADS coverage, which are expected to continue in fiscal 2023. | |||||||||
| GreatHearts Arizona | AZ | BBB | BBB- | Stable | Positive | Rating raised | Sustained trend of good operating results, coverage, and liquidity growth, coupled with a sizable and increasing enrollment base. | |||||||||
| Harmony Public Schools | TX | BBB+ | BBB | Stable | Stable | Rating raised | Exceptional demand profile, robust enrollment base, moderating debt burden, and sustained growth in financial metrics. | |||||||||
| Palmetto Scholars Academy | SC | BB | BB+ | Negative | CreditWatch negative | Rating lowered | Deterioration in operating performance leading to a DSC violation. | |||||||||
| Renaissance Public School Academy | MI | BB+ | BB | Stable | Stable | Rating raised | Material improvements in the school's financial position in fiscal years 2021 and 2022. | |||||||||
| River Heights Academy | MI | CC | B- | Negative | Negative | Rating lowered | RHA's intent and agreement with bondholders to miss its May 1, 2023 interest payment. | |||||||||
| Value Schools | CA | BBB- | BB+ | Stable | Stable | Rating raised | Material growth in reserves along with strong demand and the successful opening of its newest campus. | |||||||||
| MADS--Maximum annual debt service. DCS--Debt service coverage. | ||||||||||||||||
Table 2
| First-quarter 2023 U.S. charter schools outlook revisions | |||||
|---|---|---|---|---|---|
| Institution | State | Rating | Outlook to | Outlook from | Description |
| Twin Peaks Charter Academy | CO | BB | Stable | Negative | Material improvements in enrollment, reserves and operations, which are expected to be sustained. |
| Universal Academy (LTTS Charter School Inc.) | TX | BB- | Negative | Stable | Unexpected declines in enrollment and aggressive expansion strategy which could pressures margins and coverage. |
Table 3
| First-quarter 2023 U.S. charter schools maintained ratings | |||
|---|---|---|---|
| Institution | State | Rating | Outlook |
| A+ Charter School Inc. | TX | BBB- | Stable |
| Aspira of Delaware Inc. | DE | BB | Stable |
| Braination Inc. | TX | BBB- | Stable |
| Charter School of Educational Excellence | NY | BB | Stable |
| Choices In Learning Elementary Charter School | FL | BBB- | Stable |
| Cityscape Schools Inc. | TX | BBB- | Stable |
| Eagle Ridge Academy | MN | BB+ | Stable |
| Early Light Academy | UT | BB | Stable |
| Friends Of Teaneck Community Charter School | NJ | BB | Stable |
| Higher Ground Academy | MN | BB+ | Stable |
| Holly Academy | MI | BB+ | Stable |
| Idaho Arts Charter School | ID | BBB- | Stable |
| Jubilee Academic Center Inc. | TX | BB+ | Stable |
| KIPP DC | DC | BBB+ | Stable |
| KIPP SoCal Public Schools | CA | BBB | Stable |
| Lawndale Educational and Regional Network Charter School | IL | BBB | Stable |
| Legacy Preparatory Academy | UT | BBB- | Stable |
| Lincoln Academy | UT | BBB- | Stable |
| Loveland Classical Schools | CO | BB+ | Stable |
| Milwaukee Academy of Science | WI | BBB- | Stable |
| Mission Achievement and Success Charter School | NM | BB | Stable |
| Monument Academy | CO | BB | Negative |
| Mountain Island Charter School Inc. | NC | BBB- | Stable |
| New Branches Charter Academy | MI | BB- | Stable |
| New Designs Charter School | CA | BB+ | Stable |
| New Millennium Academy | MN | B | Stable |
| New Vision Charter School | CO | BBB- | Stable |
| North Star Academy | CO | BBB- | Stable |
| Odyssey Academy Inc. | TX | BB | Stable |
| Penn Hills Charter School of Entrepreneurship | PA | BB | Stable |
| Philadelphia Electrical And Technology Charter High School | PA | BB | Stable |
| Platte River Academy Charter School | CO | BBB- | Stable |
| Ronald Wilson Reagan Academy | UT | BB | Stable |
| Seven Generations Charter Schools | PA | BB | Stable |
| South Bronx Charter School for International Cultures & the Arts | NY | BB+ | Negative |
| Syracuse Arts Academy | UT | BBB- | Stable |
| University Laboratory School | CO | BBB- | Stable |
| Uplift Education Inc. | TX | BBB- | Stable |
| Urban Discovery Academy | CA | BB- | Stable |
| Village Tech Schools | TX | BB | Stable |
Related Research
- Economic Outlook U.S. Q2 2023: Still Resilient, Downside Risks Rise, March 27, 2023
- Charter School Brief: California, March 13, 2023
- Charter School Brief: Colorado, Feb. 27, 2023
- Outlook for U.S. Charter Schools: Credit Profiles Hold Steady, Jan. 24, 2023
- Outlook For U.S. Local Governments: Reserves And Agile Management Will Provide Stability In A Recession, Jan. 10, 2023
- Outlook For U.S. States: Rainy Day Funds Will Support Credit In A Shallow Recession, Jan. 5, 2023
- Year In Review: U.S. Charter Schools, Dec. 12, 2022
- U.S. Charter Schools Sector Fiscal 2021 Medians: Schools Get A Booster From Pandemic Relief, June 14, 2022
This report does not constitute a rating action.
| Primary Credit Analysts: | Jessica L Wood, Chicago + 1 (312) 233 7004; jessica.wood@spglobal.com |
| Avani K Parikh, New York + 1 (212) 438 1133; avani.parikh@spglobal.com | |
| Secondary Contact: | Ryan Miller, Dallas +1 2148711408; ryan.miller@spglobal.com |
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