In June 2021, two Great Hearts regions closed tax-exempt bond issues to fund growth in those regions.
GreatHearts America – Texas (GHAT) began operations in 2014 with two leased facilities. After the 2021 financing, GHAT will be poised to operate 15 schools on ten campuses in the San Antonio and Ft. Worth and surrounding area. This year, GHAT issued $84,535,000 in bonds under the Bond Guarantee Program of the Permanent School Fund (PSF). GHAT maintains a Baa3 underlying rating from Moody’s Investors Service, which qualifies them for the PSF. This is the third issue for GHAT under the PSF, with total outstanding PSF debt of around $208 million under a single Master Trust Indenture. GHAT expects to enroll just over 7.700 students in Fall 2021, and grow these 16 schools’ enrollment to over 11,800 by Fall 2025. This financing will fund two new schools for GHAT in San Antonio and Ft. Worth, as well as fund additions to schools in Irving and San Antonio.
GreatHearts Arizona (GHAZ) began operations in 2004, typically starting out in leased facilities. Some of their earlier facilities had been financed via direct placements with various investors. In 2014, Buck Financial helped design a Master Trust Indenture (MTI) structure in 2014, in which year we began a gradual shifting of outstanding debt towards the MTI. After completing financings in 2014, 2016, and 2017, GHAZ hasn’t issued debt under this MTI until this year, in which they issued a total just over $59 million. Most of GHAZ’s 2021 issue ($52.4 million) is enhanced by the Arizona Public School Enhancement Program, and qualifies for a AA- rating from S&P Global. The remaining $6.6 million was unenhanced. GHAZ carries a BBB- underlying from S&P, and as such is one of the highest rated credits under the enhancement program. The 2021 financing provided funds for two new campuses in the greater Phoenix area, as well as additions to two existing campuses. With this financing, all 21 schools operated by GHAZ will be financed under their MTI. Enrollment for Fall 2021 for GHAZ is expected to be about 14,100 students, growing to 15,300 by Fall 2024.
For 35- and 30-year debt for GHAT and GHAZ, respectively, both issues received a all-in TIC beginning with the number 2. For GHAT, 2.69% and for GHAZ, 2.86% including the unenhanced portion of the AZ deal. Not too shabby!
Buck Financial Advisors served as financial advisor to both GHAT and GHAZ. Robert W. Baird & Company, Inc. served as underwriter for both transactions, and Warren Charter Law served as borrower’s counsel for GHAT and GHAZ. Rounding out the GHAT team are the Arlington Higher Education Finance Corporation as issuer, McCall, Parkhurst & Horton LLP as bond counsel, and Quarles & Brady LLP which served as underwriter’s counsel. Locke Lord LLP served as counsel to the issuer. For GHAZ, the bond were issued through the Arizona Industrial Development Authority. Serving as bond counsel was Engleman, Berger P.C. Quarles & Brady again served as counsel to the underwriter, and Kutak Rock served as counsel to the issuer.
Congratulations to the students, families and staff of both GreatHearts regions.