Moody's Investors Service said it downgrades to Caa2 and assigns a negative outlook to the Industrial Development Authority of the County of Maricopa, Ariz., charter schools education revenue bonds (Arizona Charter School Project I) Series 2000A and taxable series 2000B outstanding in the approximate amount of $15 million.
The bonds are secured by a direct transfer of state per pupil operating revenue to the trustee to fund debt service from charter schools of varying sizes and credit qualities.
Key structural factors of the pool include available debt service reserves (in part cross-collateralized among the schools) providing limited default tolerance, a mortgage on participants' facilities, a fifteen-year initial charter period, and a 1.2 times additional bonds test.
The downgrade primarily reflects the pending closure of Omega Academy, the pool's largest participant by debt outstanding (an estimated $4.9 million of a total $15 million). As a result, Omega will no longer generate revenues to pay debt service on its share of total debt. In addition, the rating reflects the credit qualities of the remaining pool participants, available debt service reserves and the mortgage on participants' facilities.
The negative outlook reflects the significant uncertainty that remains regarding the impact that the school closure will have on the full and timely repayment of the school's bonds. Depending on the timing of the foreclosure process and the sale of the school's pledged assets, full and timely payment of school's debt is uncertain.
