In August 2019, Great Hearts America – Texas completed its first capital markets raise, a $93.350 million bond issue through the Arlington Higher Education Finance Corporation.\u00a0 The purpose of the offering was to refinance approximately $60 million of bank and subordinate debt that was used to construct four campuses, and provide about $30 million for the construction of the first phase of two new schools in San Antonio and Fort Worth.\u00a0 Robert W. Baird & Co. served as underwriter, Quarles & Brady served as underwriter’s counsel, McCall Parkhust as bond counsel, and Warren Charter Law served as borrower counsel.\u00a0 Buck Financial Advisors has served as GHAT’s Financial Advisor since 2014.<\/p>\n
GHAT opened its first school in Texas in 2014, and as of the 2019-2020 school year operates eight academies consisting of three Upper (6-12 or 7-12) and five Lower (K-5 or K-6) on 7 campuses in San Antonio and Fort Worth.\u00a0 Texas is the second state served by its parent, Great Hearts America, which also operates 22 schools in Arizona.\u00a0 GHAT currently serves about 4,600 students and the capacity financed with this issue will allow GHAT to grow to over 7,200 students.\u00a0 It secured an investment grade rating from Moody’s in Spring 2019, which qualified GHAT for the Texas Permanent School Fund Bond Guarantee Program.\u00a0 As such, bonds carried a Baa3 underlying rating and a Aaa rating based upon the PSF guarantee.\u00a0 To date, this issue received one of the lowest spreads to the MMD of any charter school PSF issue.\u00a0 The All-in TIC was 3.37% for a 35-year bond maturity – Hello!<\/p>\n
GHAT used a strategy developed by Buck Financial Advisors to use short-term, easily refinanced debt beginning in 2014 for construction, and for projects in 2016, 2017, and 2018.\u00a0 These loans had a maturity of about 5 years each, and were callable beginning in year two.\u00a0 The purpose of this strategy was to allow an efficient, low-cost exit from the original financing due to favorable call provisions versus what the high-yield bond market would have required had that strategy been pursued.\u00a0 On over $60 million of debt outstanding, GHAT paid a call “premium” of about $330,000, and had only a single escrow for one year which required a similar amount of negative arbitrage, together totaling about 1% of the par amount of the refinanced debt.\u00a0 This compares to negative arbitrage of 7-12% (or more) on typical advance refundings, or short-call premiums of 4% or greater for high-yield deals beginning in year 3 or longer.\u00a0 This strategy saved GHAT millions over a typical high-yield bond issue had that approach been utilized early on.<\/p>\n
In addition to delivering a quality education, GHAT diligently remained focused on those items which would most quickly help the bond rating achieve investment-grade status.\u00a0 Thus, only 5.5 years after commencing operations in Texas, GHAT was able to qualify for the Texas PSF.\u00a0 That is quite a feat for a fast-growing CMO, and a testament to the quality of the management team in Texas and at the parent Great Hearts America.<\/p>\n
Congratulations to the students and families of Great Hearts America – Texas!<\/p>\n","protected":false},"excerpt":{"rendered":"
In August 2019, Great Hearts America – Texas completed its first capital markets raise, a $93.350 million bond issue through the Arlington Higher Education Finance Corporation.\u00a0 The purpose of the offering was to refinance approximately $60 million of bank and subordinate debt that was used to construct four campuses, and provide about $30 million for… read more<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-253","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/posts\/253","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/comments?post=253"}],"version-history":[{"count":9,"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/posts\/253\/revisions"}],"predecessor-version":[{"id":272,"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/posts\/253\/revisions\/272"}],"wp:attachment":[{"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/media?parent=253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/categories?post=253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buckfinancial.net\/blog\/wp-json\/wp\/v2\/tags?post=253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}