KIPP SoCal Public Schools (formerly KIPP LA Schools) issued their fourth series of tax-exempt bonds in June 2019. KIPP SoCal first went to market in 2014, and followed up with issues in 2015 and 2017. This year, KIPP SoCal needed to fund smaller capital projects at some campuses that already have their permanent building, as well as construct new facilities for three existing charters which had been operating in temporary space. Buck Financial Advisors has served as FA to KIPP SoCal for all four series of issues.
Beginning with the 2015 series, KIPP SoCal’s issues have received the lowest spread to the MMD for any non-enhanced charter school issue up to that point. The 2019 issue was no exception, which is worth noting because the issue was sold at the height of the California charter school battle going on in the California legislature. KIPP SoCal’s reception demonstrates that the tax-exempt market continues to value the charter school sector and is willing to pay up for well-run organizations and for deals that are well-structured and communicated effectively.
The 2019 issue was significantly over-subscribed. KIPP SoCal has one project that was funded with this series which could possibly be derailed by the LAUSD teacher’s union via the entitlement process for that project (which is another topic worth posting about but don’t get me started). To address this, we needed to provide KIPP SoCal with an extraordinary call feature which often can penalize the borrower, as investors often demand a higher yield to compensate for the possible loss of their investment. However, we isolated that feature to a single maturity, and given the record results it would not appear that the extraordinary call had any impact on the pricing of KIPP SoCal’s issue.
KIPP SoCal operates in a tough environment, and they continue to succeed by focusing on what matters: providing low income students a quality education. Congratulations to KIPP SoCal, and the students and families they continue to serve so well.