Community Leadership Academy, CO, Revenue Bonds Upgraded To #BB+# From #BB# On Solid Outlook Stable

Stocks and Financial Services Press Releases Wednesday June 13, 2018 09:09
DALLAS--13 Jun--S&P Global Ratings

DALLAS (S&P Global Ratings) June 12, 2018--S&P Global Ratings raised its rating on Colorado Educational and Cultural Facilities Authority's series 2008 and series 2013 charter school revenue bonds issued for Community Leadership Academy (CLA) to 'BB+' from 'BB'.

The outlook is stable. "We base the upgrade on CLA's trend of solid liquidity supported by consistently positive margins more commensurate with the 'BB+' rating level when considered with the academy's favorable enterprise profile," said S&P Global Ratings credit analyst Brian Marshall. We assess CLA's enterprise profile as adequate with solid academic scores and retention rates coupled with a good relationship with the authorizer. The academy's modest waitlist constrains the enterprise profile. We assess the academy's financial profile as vulnerable based on CLA's high debt burden, projected lower maximum annual debt service (MADS) coverage for fiscal 2018 given estimated operating results, although not projected to be out of line with peers after considering other financial profile metrics.

The academy's favorable liquidity and historically positive margins, which we expect to continue over the outlook horizon, partially mitigate these factors. We believe that, combined, these credit factors lead to an indicative stand-alone credit profile of 'bb'. As our criteria indicate, the final rating can be adjusted above the indicative credit level because of overriding factors. We believe the 'BB+' rating on the school's bonds better reflects the school's healthy demand profile when compared with that of peers and medians, aided by CLA's historically solid liquidity. CLA is a prekindergarten-grade 12 public charter school in its 12th year of operations and serves a student population with 86% qualifying for free or reduced lunch and up to 55% who identify as English language learners. The school operates two facilities. The pre-K-5 students are housed at the north campus; the grades 6-12 students attend a facility at CLA's south campus about three miles away. Both facilities were financed with prior bond issuances.

The stable outlook reflects our view that the academy will maintain its existing enrollment levels and favorable academic reputation. While management's projections reflect a softening of operations in fiscal 2018 based on year-to-date results, we expect CLA will continue to generate positive full-accrual operations, while maintaining its liquidity position. We could lower the rating if enrollment fluctuates, or if there is a material depletion of cash levels and a decline in coverage to levels no longer commensurate with the 'BB+' rating level and those of peers. While unlikely over the outlook horizon in our view, we could consider a positive rating action if the school maintains a cash position near current levels, has MADS coverage that is consistent with the higher rating while maintaining its enrollment and demand profile, and has impressive academic performance despite demographic challenges. 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 S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

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