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.