Buck Financial Blog

In July 2020, KIPP SoCal closed on a $50 million revolving capital line with BBVA USA.  This taxable loan was issued under SoCal’s Master Trust Indenture created in 2014 with their first of four tax-exempt bond issues.  KLARE Holdings, a support corporation set up to be the member of LLCs which own and lease real estate to SoCal, was the actual borrower.  It is an interest-only loan with a maturity of 3-years, though borrowings are expected to be repaid with the proceeds of any tax-exempt bond issues SoCal may undertake during that time period.

This line was set up to allow SoCal more flexibility in financing its planned growth over the next several years.  Too often, there can be conflicting timing needs between the real estate closing and arranging a financing.  This line allows SoCal the ability to take down land, and begin entitlement and design work whenever the land is ready and allows a capital markets issue to be completed when that is convenient for them and without the pressure of PSA-driven timetables, etc.  Additionally, it would not be surprising if charter school opponents took another run at legislation which was introduced in 2019 but did not pass related to charter school construction bond issues in California which would not apply to a taxable line.  SoCal has at least two projects which would be good candidates for draws on this line, and which would be conducive to a larger bond issue later on when the time is right for SoCal.

SoCal is a high-performing network of 20 charter schools in fiscal 2021, with operations in the greater Los Angeles metropolitan area, as well as in San Diego.  About 8,700 students are expected in the Fall of 2020.  SoCal’s four outstanding bond issues that are on par with this loan total approximately $140 million and carry a “BBB” rating from S&P Global.

Buck Financial Advisors served as financial advisor to SoCal/KLARE.  Akin Gump Stauss Hauer & Feld LLP served as borrower’s counsel, Kutak Rock, served as bank counsel, and Zions Bank Corporate Trust served as Master Trustee.

In July 2020, High Tech High completed a $71.225 million refunding via a tax-exempt bond issue which was directly purchased by City National Bank of California (an RBC Company).  The issue was completed through the California School Finance Authority under the guidance of Treasurer Fiona Ma and Executive Director Katrina Johantgen.

Over the years, HTH had issued a series of financings, beginning in 2010 with a Qualified School Construction Bond issue.  HTH followed up that issue with a 2013 QSCB, and then issued a series of issues from 2014-2018.  All of their outstanding issues with the exception of their Series 2017 bond issue were refinanced with the proceeds of this non-rated issue, which was structured as a Master Trust Indenture financing.  Additionally, a minor new money component of $1 million was included for the construction of a kitchen at HTH’s Mesa campus.  This financing has a 20-year maturity and uses a 30-year amortization schedule.  Its all-in interest rate is 2.57% as the result of a floating-to-fixed rate swap with CNB.

HTH currently operates sixteen schools across the San Diego metropolitan region.  Their 2020 enrollment was approximately 5,800 students, and enrollment is expected to grow to over 6,500 students by fiscal 2023.  Fourteen of the sixteen HTH schools make up the obligated group of this financing (through their landlord LLCs).  The actual borrower was HTH Learning, a companion corporation set up to own facilities and lease them to HTH, and the transaction will qualify HTH for the California SB 740 lease reimbursement program.

Begun by a coalition of educators and civic leaders in and around San Diego in 2000, HTH is guided by four connected design principals which set aspirational goals and set a foundation for understanding their educational approach.  These are: equity, personalization, authentic work, and collaborative design.  Equity to address inequalities and help students reach their full potential.  Personalization to practice a learner-centered approach that supports and challenges each student.  Authentic work means to integrate hands and minds and incorporate inquiry across multiple disciplines which helps students engage in work that matters to them.  Collaborative design where teachers work together to design curriculum and projects, among other goals.

In addition to the $71 million facility financing, a $15 million working capital line-of-credit was also arranged through City National Bank.  This will be critical to allow HTH to navigate the upcoming fiscal environment for charter schools in California as a result of the economic upheaval stemming from the Covid-19 lockdowns.  Between the savings from the refunding and this line-of-credit, HTH has bolstered its ability to weather the fiscal storm expected over the next several years.

Buck Financial Advisors LLC served as Municipal Advisor to HTH, and Procopio, Cory, Hargreaves and Savitch, LLP served as borrower’s counsel.  Orrick, Herrington & Sutcliffe LLP served as bond counsel, and Kutak Rock served as bank counsel.  Wilmington Trust served as Master Trustee.  As noted, City National Bank directly purchased the bonds.

Congratulations to the students, families and staff of HTH on this milestone, and keep up the good work!

In June 2020, in only its sixth year of operation, Great Hearts America – Texas completed its second bond issue enhanced by the Texas Bond Guarantee Program under the Permanent School Fund (PSF).  Its first issue was completed in the summer of 2019.  To qualify, a bond issue must have received an investment grade rating from a nationally recognized rating agency.  GHAT’s Baa3 rating from Moody’s Investors Service was confirmed earlier in June, which then qualified this second issue for a Aaa rating based upon the PSF.

GHAT will use the proceeds of the $30,665,000 issue to fund two major projects: 1) the construction of the Phase II of their Western Hills campus, consisting of a 40,000 sq. ft. upper school classroom, and a 15,000 sq. ft. gymnasium; and 2) the purchase of land and construction of Phase I of their second campus in Ft. Worth, consisting of about 55,000 sq. ft. which will hold just under 1,100 students in grades K-6.

Through the 2020 fiscal year, GHAT operated eight schools on seven campuses in the San Antonio and greater Dallas-Ft. Worth metropolitan areas.  GHAT will open two more schools for the fiscal 2021 school year, with these two schools constructed with proceeds of the 2019 PSF issue.  When construction using the 2020 proceeds is completed, GHAT will operate twelve schools and ultimately educate over 8,700 students through the 2025 school year.

GHAT utilizes a very similar curriculum as its sister organization in Arizona, which was begun in 1996.  The curriculum focuses on classic American liberal arts educational traditions, including classes in Latin, a rigorous reading program, a requirement that each student participate in the Arts, and the requirement of a senior Thesis, defended in front of a faculty panel, prior to graduation.  GHAT believes that the highest goal of an education is to be good – intellectually and morally.   GHAT currently has a waiting list of over 6,300 students throughout the Texas network, testifying to the demand for such a rigorous, college-prep curriculum.

Buck Financial Advisors LLC served as municipal advisor on the transaction.  Robert W. Baird Inc. served as underwriter, McCall, Parkhurst, and Horton LLP as bond counsel, Quarles & Brady LLP as underwriter’s counsel, and Warren Charter Law as borrower’s counsel.  The issuer was the Arlington Higher Education Finance Corporation.  This was the same team which served GHAT on its 2019 bond issue.

Congratulations to the students, families, and staff of GHAT on its second PSF issue.  To grow as quickly as they are while still qualifying for an investment grade rating in only their fifth year, and maintaining it this year, is truly an accomplishment.