Published: September 01, 2010
Fitch Rates Chester Community Charter School (PA) Revenue Bonds 'BBB'; Outlook Stable
NEW YORK - (BUSINESS WIRE) - Fitch Ratings assigns a 'BBB' rating to the following charter school
revenue bond series issued by the Delaware County Industrial Development
Authority on behalf of the Chester Community Charter School (CCCS, or
the school):
--$31,875,000 Charter School Revenue Bonds (Chester Community Charter
School Project) series 2010A;
--$25,000,000 Charter School Revenue Bonds (Chester Community Charter
School Project) series 2010B;
--$600,000 Charter School Revenue Bonds (Chester Community Charter
School Project) taxable series 2010C.
The bonds are expected to be sold via negotiated sale on or about Sept.
16, 2010. Bond proceeds will be used to acquire the land and existing
instructional facilities currently being used by the school, fund a debt
service reserve fund and pay the costs of issuance related to the bond
sale.
The Rating Outlook is Stable.
RATING RATIONALE:
--The 'BBB' rating reflects Chester Community Charter School's strong
market-share and demand within the Chester Upland School District
(CUSD), established management infrastructure, strong security structure
and moderate debt burden.
--Offsetting concerns include CCCS's limited liquidity, narrow operating
margins, limited revenue diversity and charter renewal risk, all of
which are common amongst charter school financings.
KEY RATING DRIVERS:
--Maintenance of the existing management relationship between CCCS and
Charter School Management, Inc. (CSMI).
--Continued success in enrolling incoming kindergarten-aged students,
and retaining those students through completion of the eighth grade.
--Sustained performance standards for adequate yearly progress as
measured by the state vis-a-vis CUSD and other local schools on an
ongoing basis.
SECURITY:
The bonds are secured by the school's pledged revenues and a mortgage on
the property and facilities. Pledged revenues are defined as all
revenues and income derived from the facilities, with the exception of
any administrative fees paid to the 501(c)3 building corporation.
CREDIT SUMMARY:
Chester Community Charter School was formed in 1998 to serve the city of
Chester, PA and the Chester Upland School District. CCCS has experienced
significant growth since its first operational year in 1998, in terms of
students served, grades offered and facilities available. In its first
year, Chester served 97 students in grades K-4 in rented hotel
conference room space. In 2009, the school served over 2,500 students in
grades K-8 on two fully equipped campuses.
CCCS has a very strong relationship with its management company, which
was formed specifically to manage the school's operations by local
citizens concerned with the status of public education available in
Chester, PA. The school is managed with a business-centric focus on
efficiency in both financial management practices and implementation of
strategies designed to improve each student's academic success.
CCCS's major strength is its ability to attract students through its new
facilities, state-of-the-art technology and most important, its student
success rates. The school currently serves over 50% of the K-8
population served by the Chester Upland School District, which
underscores strong demand for the school. Over its history, the school's
success rates on state standardized tests has improved dramatically and
compares favorably to the Chester Upland School District, other local
school districts and the African-American student population state-wide.
Like many other charter schools, CCCS is heavily reliant on per pupil
allocations for funding. In Pennsylvania, charter schools are allocated
$0.75 of every $1.00 of state-funding received by the public school
districts. This limited funding base combined with a commitment to
providing students with a top quality education supported by
state-of-the-art facilities and technology has resulted in narrow to
slightly negative operating margins for the school and very limited
liquidity. While both of these characteristics are common to most
charter schools, particularly the limited financial cushion, the metrics
are extremely weak for the sector. To some extent, the strong security
package afforded to bondholders, which includes financial covenants
designed to address the balance sheet weakness, serves to mitigate these
concerns. The strong demand for and necessity of the services provided
by the school also contribute significantly to determination of the
assigned rating.
Additional information is available at www.fitchratings.com
In addition to the sources of information identified in the
Revenue-Supported Rating Criteria, this action was additionally informed
by information from D.A. Davidson & Co., the school's underwriter.
Related Research:
'Revenue-Supported Rating Criteria', dated 16 Aug. 16, 2010;
'Criteria for Rating Charter Schools', dated Jan. 23, 2007.
For information on Build America Bonds, visit www.fitchratings.com/BABs.
Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548606
Criteria for Rating Charter Schools
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=311604
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DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
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IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
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THIS SITE.
Fitch Ratings
Primary Analyst
Angela Guerrero, +1-212-908-0259
Associate
Director
One State Street Plaza
New York, NY 10004
or
Secondary
Analyst
James George, +1-212-908-0652
Director
or
Committee
Chairperson
Douglas J. Kilcommons, +1-212-908-0740
Senior
Director
or
Media Relations, New York
Cindy Stoller,
+1-212-908-0526
cindy.stoller@fitchratings.com
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