Page 11 - Equus - Intoductory Book

SkyView Academy
Series 2014 $29,120,000
4/12/2018
Credit Structure
Moody's Rating None S&P Rating BB Enhancements None
CEO/ED CFO
Bd. Chair
Currently Vacant Lori Bachtel Jeremy Stahl
Structure Industry State
Revenue Charter School Colorado
Covenants 1.10x DSC & 45 DCOH Min. Denom$.500,000
Call Date 7/1/2024
Analyst Contact Phone
Scott Hanley
Lori Bachtel
(303) 471-8439 x 247
Credit Overview
Credit Overview - SkyView Academy, located in Highlands Ranch, Colorado, has been in operation for seven years. Originally serving kindergarten through fifth grades, the school sequentially Utiliza
added middle and high school grades beginning in 2010 and reached full K-12 status for the 14/15 school year. Enrollment of 1,287 for the 17/18 school year is +1.4 percent year/year but only 80 percent of capacity. The primary miss is within the high school. Management cites enrollment underperformance due to housing affordability and inability to draw students from other K-8 charter schools. SkyView has strong support from the school district. The school received a five year reauthorization in 2017 and is an equal recipient in mill levy override revenues. The school benefits from its location in the affluent south Denver region. Only seven percent of the student body qualifies for 'Free & Reduced Lunch' and CMAS results are generally above the district and state averages across grade levels. In 2017, SkyView's Junior class SAT average was 1164, well above the district and state averages of 1090 and 1015, respectively. The school had a 100 percent graduation rate in 2017 and 84 percent of students attended a four year university. The Series 2014 bonds were used to refinance existing debt as well as replace the roof and sprinkler system.
Management - Recent turnover in top management was cited as one cause for downgrade by S&P. Upon speaking with current management and board, the decision to part ways with the prior Executive Director in July 2017 was mutual and did not result in a divided staff/student body. Management currently consists of lower and upper school principals and an operations director (Lori Bachtel). The Board is currently evaluating head of school candidates and have finalized a list of prospects. A decision will be made before the start of the 18/19 school year.
Physical Inspection - A site visit was conducted on April 3, 2018 as well as when the bonds were issued in 2014. The Campus is a renovated Home Depot just south of C-470 and Quebec. While along a prominent highway in the Metro Denver area, the campus is tucked behind existing commercial development and does not maintain a high visibility location. The facility is in good shape and features similar amenities of traditional public schools: turf fields, two gymnasiums, cafeteria and library/computer lab. Three wings separate the elementary, administration and middle/high schools. Such a layout provides a distinguished feel of being in respective schools.
Due Diligence - Equus originally toured the facility upon bond issuance in 2014 and has taken part in numerous individual calls with management since. A recent S&P downgrade to BB and poor enrollment trends triggered the recent site visit. Since PPF accounts for majority of revenues, tracking enrollment ahead of October headcount is the number one priority. According to management in April 2018, 91 percent of currently enrolled students indicated their intention to return for the 18/19 school year. Equus will monitor enrollment projections heading into the summer and early fall months ahead of the October headcount. Performance improvements building DCOH above 75 is credit positive, too.
Credit Decision & Commentary - When compared to original projections at issuance, enrollment, DCOH and coverage ratios have disappointed. A refresh in management and promising enrollment trends and nearly two years in debt service reserves provides adequate compensation for the +182bps spread to the 6Y MMD provided by the 2024 maturity yielding 3.98% on April 4, 2018.
Continued Monitoring Factors - PPF funding accounts for nearly 80 percent of revenues. The success of Skyview Academy and timely payment of debt service depends on the maintenance of stable enrollment. A dip below 1,245 students is a key marker in the school's ability to pay debt without staff changes and cutting services. Ability to build cash reserves closer to 100 days was expressed by Equus and will be closely tracked.
Financial Statement Summary
Enrollment & Debt/FTE
BALANCE SHEET
Unrestricted Cash $ 1,219 Restricted Cash 1,787 Other Assets 23,490
Total Assets 26,495 Current liabilities 1,112
Debt Outstanding 25,650 Net Pension Liability -
Total Liabilities 26,762 Total Net Assets $ (267)
INCOME STATEMENT
Per Pupil Funding $ 6,315 Other 2,092 Revenues 8,407
Expenses 7,044
Operating Income $ 1,363 Debt Service (1,437)
Other Income (Expenses) 120 Change in Assets $ 46
Metrics
Enrollment 1,119 Debt Service Coverage 0.95 Days Cash on Hand 63 DebtperFTE $ 22,922 Pension per FTE $ -
$
$ $
$ $
$ $
1,768
4,387 25,719 31,873
1,525 29,141 14,135 44,801
(12,928)
8,051
2,556 10,607
8,374
2,233
(1,490) (258)
484
1,350 1.50 77 21,586 10,470
$
$ $
$ $
$ $
1,974
3,162 28,871 34,008
1,507 29,136 18,383 49,026
(15,019)
8,412
2,573 10,985
9,226
1,759
(1,515) (110)
134
1,239 1.16 78 23,525 14,843
$
$ $
$ $
$ $
2,018
3,227 38,909 44,155
1,345 29,160 36,057 66,561
(22,406)
8,776
2,558 11,334
9,535
1,799
(1,583) (243) (27)
1,269 1.14 77 22,979 28,413
$
$ $
$ $
$ $
$
$ $
$ $
$ $
2013-2014 2014-2015 2015-16 2016-17
2017-18E
2,132
3,227 38,283 43,643
1,345 28,775 36,057 66,176
(22,533)
9,342
2,667 12,010
9,871
2,139
(1,875) -
264
1,287 1.14 79 22,358 28,016
2018-19E
2,206
3,227 37,674 43,108
1,345 28,370 36,057 65,771
(22,663)
10,050 2,572 12,622
10,297 2,325 (1,878)
(150) 297
1,300 1.24 78 21,823 27,736
$60,000 $40,000 $20,000
$-
2013-2014
2014-2015
2015-16
2016-17
2017-18E
2018-19E
1,300 1,200 1,100 1,000
Debt per FTE
Pension Liability per FTE
Enrollment 1,400
Days Cash on Hand & Debt Service Coverage
Days COH
Debt Service Coverage
100
90
80
70
60
50
2013-2014 2014-2015
2015-16
2016-17
2017-18E
2018-19E
1.75 1.50 1.25 1.00 0.75
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither Equus Private Wealth nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of the Equus Private Wealth Management, LLC. Data for this report was obtained from the Official Statement, SkyView Academy's financial reports, personal conversations and internal forecasting. These estimates are subject to change. For questions regarding this report, please call Scott Hanley at (970) 963-2674.
Days COH
Debt Service Coverage