Standard & Poor's Ratings Services said it lowered its long-term rating on the District of Columbia's series 2007 tax-exempt fixed-rate revenue bonds issued for Community Academy Public Charter School (CAPCS) to CCC from B-minus.
The rating remains on CreditWatch with developing implications.
"The CCC rating reflects our view of the decision by DC Public Charter School Board to initiate revocation of the school's charter," said Standard & Poor's credit analyst Sharon Gigante. The process started on Dec. 15, 2014, when the board voted unanimously to initiate the process to revoke the school's charter on account of fiscal mismanagement. The charge against the school for fiscal mismanagement is directly related to litigation against the school and the school's founder, Kent Amos and his charter management company, Community Action Partners and Charter School Management LLC.
In October 2014, a Superior court judge passed a preliminary injunction to order the school to stop payments to the management company at which time the school severed its relationship with the management company. Per statute, the school presented its case against fiscal mismanagement and revocation of the charter to the DCPCSB in a public hearing on Jan. 27, 2015. The school states it does not believe it has entered a pattern of fiscal mismanagement and is fiscally sound. The final decision to revoke the school's charter is pending a vote by DCPCSB and a decision is due on Feb. 12, 2015. If the board votes to revoke the charter, the school plans to request a stay of revocation through the courts.
In S&P's opinion, CAPCS does not have sufficient liquidity to repay the bond proceeds in the event the charter is revoked and could default absent some external intervention, such as the sale of the campus.
If the school is successful in appealing the revocation and the DCPCSB rescinds the notice to revoke the charter, the agency would likely raise the rating.
The CreditWatch developing reflects the uncertainty regarding the outcome of the vote by DCPCSB to revoke the school's charter. Standard & Poor's expects to resolve the CreditWatch action shortly after the board's decision on revocation.
