S&P Junks Florida's Learning Gate Charter School

BRADENTON, Fla. — Standard & Poor's downgraded the rating of the 13-year-old Learning Gate Community School in Lutz, Fla. to BB from BBB-minus citing weak liquidity and operating performance, and closure of an associated facility.

The below-investment grade rating affects $7.5 million of 2007 A bonds maturing in 2037 and B bonds maturing in 2017 issued by the Florida Development Finance Corp. on behalf of LGCS.

The outlook is stable.

"The rating action reflects our view of the credit risks associated with the school, particularly its very weak liquidity ratios, which we believe will remain low for at least the next two fiscal years given the school's evolving trend of weakened operating performance," said a report by S&P analyst Chris Littlewood.

LGCS's profile could weaken further due to closing of the Global School of the Arts, Technology, and Environmental Sciences high school, which was a separate charter and financially distinct entity, Littlewood said.

Learning Gate, a kindergarten through eighth-grade school, and the high school shared space at a newly leased facility, and shared management. The primary school was expected to funnel students to the high school.

LGCS will remain in operation, and response to the high school closing has been neutral. However, the consolidation of programming may hurt LGCS' demand profile in the future, Littlewood said.

The S&P rating reflects seven days' unrestricted cash on hand at the end of fiscal 2012, low cash-to-debt at 1.3%, a declining unrestricted net asset position that dipped 10%, reorganization risk due to the high school closing, and inherent uncertainty associated with the final maturity of the bonds, which exceeds the ending date of the existing charter.

Offsets to the credit weakness include the school's historically sound demand profile with a waiting list of about 430 students in the fall of 2012, solid lease-adjusted maximum annual debt service coverage of 1.6 times for fiscal 2012, specialized curriculum dedicated to environmental science, strong test scores, and a successful 15-year charter renewal in 2010.

LGCS is in northern Hillsborough County. It opened in 1983 as a private pre-kindergarten through second grade school and gradually expanded to include eighth grade. It converted to a charter school in 2000.

S&P downgraded Learning Gate on Aug. 30, just a week after dropping the BBB-minus rating of the 11-year-old Charter Schools of Boynton Beach, Fla., well into junk territory to B.

For reprint and licensing requests for this article, click here.
Florida
MORE FROM BOND BUYER