Palm Bay Academy became the latest Florida charter school to default on bonds.
The bond trustee, UMB Bank, N.A., posted to the MSRB's EMMA website that "holders of substantially all of the bonds" had reached a deal with the school last week.
Holders of the Series 2017A senior lien revenue bonds will receive 77 cents on the dollar on the unpaid principal and 10 cents on the dollar on unpaid and accrued interest. Holders of the various subordinate bonds — Series 2017C, D, E, and F — will get nothing.
The academy had $14.8 million of bonds before the default deal.
Bondholders agreed to sell their stake in the school to generate the cash to allow the payoff of the Series 2017A bonds.
"We do expect credit pressures to continue and to lead to more defaults" in the charter school sector, Belle Haven Investments Partner and Director of Muni Research Dora Lee said. "The higher interest rate environment is making it harder to find refinancing options that will make their debt load more sustainable."
Nearly all bondholders "have been working with the borrower and trustee for an extended period of time in an effort to support the operations of the borrower and its mission," the bond trustee said in the EMMA posting. "In spite of those efforts, events of default have occurred and are continuing under the bond documents, including, among other things, the borrower's inability to meet the days' cash on hand requirement under the loan agreement."
The bonds were issued unrated and first became impaired in September 2020, when there was a breach in the reserve fund, according to MMA President Matt Fabian.
Palm Bay Academy defaulted 2013 on bonds issued in 2007, Fabian reported in Default Trends. Problems with the 2007 bonds were resolved with the issuance of new bonds in 2016 or 2017.
Palm Bay Academy didn't immediately respond to a request for a comment.
Default Trends also reported that another charter school, Chavez/Huerta K-12 Prep Academy, based in Colorado, defaulted on $43.6 million in bonds on July 1.
The defaults come as the
In Florida, Tallahassee Classical School defaulted in early July and
