Fitch Ratings is preparing to possibly drop nearly all of its charter school ratings.

On Thursday Fitch announced an exposure draft of new charter school criteria, proposing revisions to existing rating criteria.

“Recent events in the charter school sector led Fitch to re-evaluate its assessment of the financial and operational downside risks facing these entities,” Fitch wrote. “Fundamentally, Fitch views charter schools as inherently non-investment grade because of their typically high leverage and lack of operational and financial flexibility.”

When it adopts the new criteria, Fitch expects that charter schools would never be rated above BBB, just two notches above a speculative grade. Adopting the policy would require Fitch make a minimum three-notch downgrade to the American Academy Charter School, the Crown Pointe Academy of Westminster and the Pinnacle Charter School, all based in Colorado and all three currently rated single-A.

The exposure draft can be found on Fitch’s website. The agency will take comments on the draft at csfeedback@fitchratings.com with a deadline of Aug. 20.

After the comment period, Fitch expects to place nearly all of the 22 charter schools it rates on negative rating watch. It would then do full reviews on all of the schools using the new criteria. The reviews may take six months.

Fitch is seeking feedback on four broad proposals for rating criteria changes.

First, the new criteria are expected to have increased emphasis on external risk factors. The operating model exposes charter schools to elevated political, regulatory and competitive risk.

Second, Fitch is expected to cap a charter school’s rating at the level of the school district that either authorizes it or serves as a pass-through for per-pupil funding.

Third, Fitch is expected to give speculative-grade ratings to all schools until they have at least five years of audited history and have had their charter renewed. A possible exception may be made for some schools with an initial charter of more than five years.

Fourth, Fitch’s new criteria are expected to have a variety of financial requirements for charter schools to obtain investment-grade ratings. For example, schools will have to have net debt-to-net income available for debt service levels of 10 times or less.

Currently Fitch rates three schools at A, nine at BBB, 10 at BBB-minus, five at BB-plus and one at BB.

Standard & Poor’s has a similar spread of charter school ratings. As of June 18, 117 were investment-grade and 32 were speculative-grade. None of the schools were rated above BBB-plus.

Moody’s only rates six charter school systems, with the highest one rated Baa1.

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