Standard & Poor's Ratings Services said it removed its B-minus rating on Detroit Community Schools (DCS), Mich.'s series 2005 public school academy revenue bonds from CreditWatch, where it was placed with negative implications on Sept. 10, 2015.
It removed the rating from CreditWatch as the school has since provided sufficient information to maintain the rating. The outlook is stable.
"The stable outlook reflects our view of DCS' stabilizing enrollment and improved operating performance in fiscal 2015," said Standard & Poor's credit analyst Avani Parikh, "with maximum annual debt service (MADS) coverage right at 1x and a weak, but steady liquidity position."
The school remains in violation of its fund balance covenant, but is retaining the necessary funds toward meeting requirements, and the violation is not considered an event of default nor have bondholders taken any action at this time, the agency said. As DCS' financial metrics remain slim, the school must demonstrate a sustained trend of headcount and operational stability, with continued progress toward resolving the covenant violation, to maintain the rating.
"The B-minus rating further reflects our view of the school's significant enrollment decline since fall 2010 due to managerial instability and an economically challenged service area," she added, "though headcount for fall 2015 is up 1.6% and may indicate early signs of stabilization."
