Washington State Housing Finance Commission — Moody’s assigns initial Ba2 to Spokane International Academy, WA’s Charter School Revenue Bonds; outlook stable

Rating Action: Moody’s assigns initial Ba2 to Spokane International Academy, WA’s Charter School Revenue Bonds; outlook stableGlobal Credit Research – 09 Mar 2021New York, March 09, 2021 — Moody’s Investors Service has assigned an initial Ba2 to Spokane International Academy, WA’s $19.4 million Nonprofit Revenue Bonds (Spokane International Academy Project) Series 2021A and Taxable Nonprofit Revenue Bonds (Spokane International Academy Project) Series 2021B. The outlook is stable.RATINGS RATIONALEThe Ba2 rating reflects the charter school’s relatively competitive profile with unique curriculum offerings and solid academic performance relative to competitors in the area. The rating incorporates the school’s expanding scope of operations, specifically the opening of a high school, and adequate financial position that relies somewhat on a combination of enrollment per pupil funding growth and contributions/grants to achieve projected coverage ratios and liquidity. The rating further incorporates the higher leverage and fixed costs resulting from the new debt issuance, though this is expected to remain fairly manageable given limited additional debt plans and a generally level debt service schedule. The pension liability associated with participation in the statewide pension plan is expected to remain manageable.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action and we do not see any material immediate credit risks stemming from the coronavirus pandemic for Spokane International Academy. As of February 25, 2021, the school had roughly 400 students in grades K – fifth attending in person learning with the remaining students continuing distance learning instruction. The school anticipates its sixth, seventh, and eighth graders will begin in person instruction on March 22, 2021. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of Spokane Academy changes, we will update the rating and/or outlook at that time.RATING OUTLOOKThe stable outlook reflects our expectation that the school’s financial position will gradually improve given anticipated growth through expansion, a relatively competitive profile that has resulted in a solid waitlist, and projected operating surpluses through fiscal 2026.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material and sustained growth in debt service coverage and liquidity- Continued growth in enrollment, inclusive of high school, that meets projected targets with a strong waitlistFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Declines in enrollment from current and/or projected levels- Weakening of liquidity and/or debt service coverage below projections- Poor academic performance that jeopardizes the school’s ability to renew charter and impacts competitiveness relative to competitors in the areaLEGAL SECURITYThe Series 2021A and 2021B bonds are special, limited obligations of the Washington State Housing Finance Commission secured solely by revenues derived from a loan agreement with Spokane International Academy. Under the loan agreement, the academy has pledged to make payments derived from revenues received from the operation of the financed facility. The academy has also executed a deed of trust covering its real and personal property interests associated with the financed facility as security for the debt. Additionally, a debt service reserve fund is to be funded with bond proceeds at the maximum annual debt service.USE OF PROCEEDSThe Series 2021A & B bonds will finance the acquisition of the academy’s currently leased school facility and to make various facility renovations and improvements.METHODOLOGYThe principal methodology used in these ratings was US Charter Schools published in September 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1039451. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. 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