Bronx Charter School For Excellence, NY Debt Rating Outlook Revised To Stable From Negative On Improved Cash Position

Stocks and Financial Services Press Releases Wednesday November 15, 2017 08:57
NEW YORK--15 Nov--S&P Global Ratings

NEW YORK (S&P Global Ratings) Nov. 14, 2017--S&P Global Ratings revised the outlook on its 'BBB-' rating on Build NYC Resource Corp., N.Y.'s series 2013A tax-exempt revenue bonds and series 2013B taxable revenue bonds, issued for Bronx Charter School for Excellence (BCSE), to stable from negative and affirmed the rating.

The outlook revision reflects S&P Global Ratings' opinion of BCSE's improved cash, which the rating service believes is more in-line with the current rating. Furthermore, increased enrollment has led to improved financial performance and lease-adjusted maximum annual debt service (MADS) coverage that, in S&P Global Ratings' view, somewhat offsets financial pressure associated with the opening of new schools during the next couple of years.

The rating reflects S&P Global Ratings' group credit profile on BCSE (bbb-), and its view of BCSE's obligation to support the bonds is core to the organization.

"We could reassess the rating if the obligated group's status evolves due to BCSE's expansion. We could lower the rating if BCSE's plans for replication were to place pressure on the group's finances, causing cash and MADS coverage to decline to levels we no longer consider consistent with investment-grade medians," said S&P Global Ratings credit analyst Beatriz Peguero. "Our raising the rating or revising the outlook to positive is unlikely over the two-year outlook period due to the opening of new schools and startup costs associated with expansion. However, we could raise the rating if BCSE were to demonstrate MADS coverage more consistent with the higher-rating category while maintaining its enrollment and demand, impressive academic performance, and healthy liquidity."

The obligated school accounts for a majority of the assets, revenue, and enrollment of BCSE Education Corp. Due to BCSE's core status, the rating is equal to the rating on the group-credit profile. Due to expansion plans, the obligated group's core status could change; S&P Global Ratings will evaluate it as the organization evolves with the addition of new schools. The rating applies only to the bonds and not to BCSE Education Corp. as an organization.

S&P Global Ratings assessed BCSE's enterprise profile as adequate with solid demand and a robust waitlist, growing enrollment, and above-average academic performance tempered by significant expansion plans. S&P Global Ratings assessed BCSE's financial profile as adequate with respectable operating margins, healthy lease-adjusted MADS coverage, and improved cash. The rating service believes that combined, these credit factors led to an indicative stand-alone credit profile of 'bbb-' and a final rating of 'BBB-'.

The stable outlook reflects S&P Global Ratings' opinion that during the next two fiscal years, BCSE will likely maintain its steady financial profile by continuing to grow enrollment, generate positive revenue over expenses, and keep MADS and debt service coverage at current rating-category medians and that it will likely maintain stable cash. The rating service also expects that management will likely manage risks associated with the opening of BCSE No. 3 and BCSE No. 4 schools effectively and that the demand profile will likely continue to reflect its excellent academics, superb waitlist, and growing enrollment.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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