Standard & Poor's Ratings Services said it lowered its rating to B-minus from B and removed the rating from CreditWatch on Michigan Finance Authority's series 2011 public school academy limited obligation revenue bonds issued for Voyageur Academy.
The outlook is stable.
"The rating reflects our view that, despite a level of stability at the school under new management and a slight improvement in financial operations in fiscal 2014, we still believe there are significant weaknesses that pressure the rating," said Standard & Poor's credit analyst Ashley Ramchandani. "These factors include potential enrollment declines and the general uncertainty about demand in Detroit, a lack of proven academic results, uncertainties about the length of the charter renewal, and the use of a forbearance agreement to draw down the debt service reserve this year coupled with the possibility of additional draws in the future that would require continual cooperation and support from bondholders."
A new management company, American Promise Schools, was brought on to replace The Leona Group LLC and officially started on July 1, 2014. At that time, the authorizer, Ferris State University, also issued a one-year contract of reauthorization, expiring June 2015, that was conditional upon fulfillment of a Plan of Correction by the Voyageur board.
The board has since fulfilled the items on the Plan of Correction, and the school is currently working through the renewal process with the authorizer. The charter is expected to be renewed, but there is uncertainty about the length of the renewal.
On Dec. 5, 2014, Voyageur Academy entered into a forbearance agreement, whereby approximately $236,137 would be drawn from the debt service reserve fund to pay the difference between the maximum 20% of state aid that is allowed to be used for debt service and the total facilities cost, which includes debt service on the series 2011 bonds and the elementary school lease.
