BRADENTON, Fla. — Standard & Poor's cut its rating six notches to CC from B on bonds issued for the Charter School of Boynton Beach, Fla., saying there is a "virtual certainty of default."
The 12-year-old charter school sold $9 million of bonds in 2012, with the city of Boynton Beach as conduit. The outlook is negative, S&P said Aug. 15.
The Palm Beach County School District revoked the Boynton school's charter on July 30 because it received a grade score of "F" on academic ranking from the state of Florida two years in a row. The district originally authorized a 15-year charter through 2026.
Losing the charter effectively closed the school, and bondholders had not been notified of the status on EMMA as of Aug. 18.
"The downgrade and negative outlook reflect our view that given the revocation of the charter and closure of the school, there is a virtual certainty of default within the next 24 months," said S&P analyst Carolyn McLean. "We expect that the bonds will likely default within the next 24 months given that the charter school no longer has access to operating revenue once the charter is revoked."
The school is appealing the "F" score for the most recent school year, but S&P reported that school district officials said the score is low enough that it is unlikely to be adjusted to "D" by the state. If the academic ranking score is not adjusted, state statute does not provide for further appeal of the charter revocation.
The district said the Boynton charter school does not plan to open for the 2014-2015 school year, and that students will attend to the district's public schools or other charter schools, said McLean.
"Bondholders benefit from a fully funded debt service reserve fund that could cover additional debt service payments," she said. "Our expectation is that the debt service payment due on June 1, 2014, was made with operating funds, and the following year's debt service payments could be covered by the debt-service reserve after which the debt service reserve fund would be exhausted."
The last communication with bondholders on EMMA was filed by UMB, NA June 27 stating that it had replaced Regions Bank as trustee. UMB hired Charter School Services Corp. to do a comprehensive review of the Boynton charter school. The 20-page notice and review is posted on EMMA.
The Charter School of Boynton Beach opened in the 2002-2003 school year with 90 students in kindergarten through third grade. In 2012-2013, the school had 835 students in grades K-11. Enrollment was less than 800 in 2013-2014 for grades K-12, and below the target of 835, according to S&P.
Because of the enrollment drop, the management team was required to close the 10th, 11th, and 12th grades for the last school year.