School Lane Charter School, PA #BBB-# Bond Rating Removed From Watch Outlook Neg On Increased Debt

Stocks and Financial Services Press Releases Friday November 7, 2014 08:56
Standard & Poor's--7 Nov--Standard & Poor's

Standard & Poor's Ratings Services has affirmed its 'BBB-' long-term rating onBucks County Industrial Development Authority, Pa.'s $10.1 million series2007A tax-exempt fixed-rate revenue bonds, issued for School Lane CharterSchool (School Lane) and removed the rating from CreditWatch with negativeimplications where it was placed on Aug. 18. 2014. The outlook is negative.

"The outlook reflects our view of School Lane's plans for additional debt,which call for lease payments for a temporary high school facility as well aspotential borrowings to finance a permanent high school facility, which couldessentially double the school's debt load over the next two years," said

Standard & Poor's credit analyst Luke Gildner. "While School Lane's financialprofile has historically been characterized by healthy operating performance,good maximum annual debt service coverage, and a manageable debt burden, inour view, the simultaneous lease and debt plans negatively affect the school'sdebt burden and coverage metrics to levels more in line with a lower rating."

In our view, the investment-grade rating at this time continues to besupported by School Lane's continued positive operating performance, strongdemand profile, and healthy unrestricted cash position, which provide somecushion for the school's debt plans and transition risk associated with a

brand new high school program. We will continue to monitor the school's debtprofile, and if School Lane's borrowing plans accelerate, this could furtherpressure the rating.

The negative outlook reflects the uncertainty surrounding School Lane's planswith regards to additional borrowing to finance the school's permanent highschool facility. We understand the school plans have been delayed as they didnot receive zoning approval from the township for a proposed site this fall.

In our view, if the transaction closes as currently planned by management, theresulting debt structure would weaken the financial profile to a level nolonger consistent with investment-grade characteristics. We could revise theoutlook to stable if operations produce sufficient debt service coverage on apro forma basis and the school's debt profile is more consistent with thecurrent rating category.

School Lane began operations in the 1998-1999 school year as a kindergartenthrough sixth-grade school, with initial enrollment of 450. It was the firstschool to receive its charter in Bucks County. Currently, the school serves968 students in grades kindergarten through ninth, with plans to expand to afull high school program over the next three years. School Lane is northeastof Philadelphia in Bensalem township and services seven districts.

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