Standard & Poor's Ratings Services said it lowered its rating to BB-plus from BBB-minus on Riverhead IDA Economic Job Development Corp., N.Y.'s series 2013A and 2013B revenue bonds issued on behalf of Riverhead Charter School (RCS).
At the same time, the outlook on the bond has been revised to negative from stable.
"The downgrade to BB-plus and negative outlook reflect our opinion that the school's charter could be at risk for nonrenewal when it submits its renewal application in one year given that the authorizer indicated, in its January 2015 site visit report, that RCS fell far below authorizer benchmarks in culture, climate, and family engagement; board oversight and governance; and mission and key design and that it was approaching benchmark in the remaining measurements," said Standard & Poor's credit analyst Debra Boyd.
The school's charter is up for renewal on June 30, 2017, and the negative outlook reflects the view that there is an increased risk that the authorizer could deem the school's progress on benchmarks insufficient at the time RCS is required to submit its renewal application in 2016.
"The downgrade also reflects the school's weak maximum annual debt service coverage, reflective of a lower rating, with coverage below 1x in fiscal 2014 and expected in fiscal 2015 based on nine months of financial results," added Boyd. "We believe the school's good enrollment growth and very strong cash levels remain credit strengths and help to preclude a multi-notch downgrade at this time."
The series 2013 bond proceeds were used to construct a new 50,000 square foot building on the school's existing property to house the entire school population with 18 classrooms, a cafeteria/gym, kitchen, library, faculty room, and a redesigned parking lot. After two years of construction, the school moved into its new building in January 2015 for the spring semester.
