BRADENTON, Fla. — Bondholders demanded immediate repayment from Fulton Science Academy Inc. following the suburban Atlanta charter school’s inability to cure events of default, including failure to renew a charter for one of three schools.
The bondholders opted to seek accelerated payment after being told by the trustee for bondholders that the charter school omitted material facts in bond documents, the trustee said in a market notice Monday.
Wells Fargo Bank NA said that all of the principal and interest on the bonds is now due, and bondholders are owed $18.93 million plus $572,466 in interest.
FSA could not be reached for comment. The charter school has not posted information on its website about what it will do next. Local newspapers have said that the school will become a private entity.
The Alpharetta Development Authority issued bonds for the academy in November. At the time, the uninsured bonds had an investment-grade rating of BBB from Fitch Ratings.
Proceeds were to be used to build a campus where FSA planned to co-locate its elementary, middle and high schools. The bonds are secured by a first mortgage lien on the new campus and payable by all three schools.
According to notices by Wells Fargo, FSA’s problems began before the bonds were sold when it asked the Fulton County School District to renew its middle school charter for a longer period than typical. The middle school’s local charter expires on Saturday.
School district and academy officials negotiated but the longer charter was ultimately denied.
FSA then pursued a state charter, but in early May the state education board unanimously rejected the request citing managerial and financial problems.
Fitch then dropped its rating to CC, and withdrew it after FSA said it would no longer participate in the rating process.
On May 15, Wells Fargo notified bondholders directly that it believed FSA was in default because the charter school “omitted material information” about its charter petition in its Oct. 5 preliminary official statement. Two months before the POS was published, the school proposed a renewal of its charter that resulted in correspondence from Fulton County schools that “communicated significant reservations,” the trustee said.
No information about the charter renewal issues was included in bond documents, and after the bonds were sold on Nov. 3, Fulton County schools denied the charter renewal, “citing numerous concerns of which Fulton Science Academy must have been aware at the time it was offering the bonds,” the trustee’s default notice said.
“This failure to disclose the ongoing concerns with Fulton Science Academy’s charter renewal petition constituted an omission of material facts in the official statement,” Wells Fargo said, adding that the omission was a breach of the loan agreement and a default event.
The trustee also said that failure to renew the charter was a violation of the agreement. In mid-May, FSA was given 30 days to remedy the default.