North Carolina charter school breaches covenants

MMA partner Matt Fabian (pictured) and Chief Credit Officer Lisa Washburn noted in a report that 67% of North Carolina’s impairments have come from bonds issued by Wisconsin’s Public Finance Authority.

North Carolina charter school Bonnie Cone Classical Academy breached bond covenants, Municipal Market Analytics reported this week.

The public school for grades K-6 days cash on hand and debt service coverage fell below the commitments it made in the bonds’ lease agreements, it announced in postings to EMMA and the lease agreements were pledged as part of the bonds’ security in the official statements.

The school has $82.3 million in bond debt outstanding, according to MMA’s Default Trends, which reported the covenant violations in a report by partner Matt Fabian and Managing Director Lisa Washburn.

The loan agreement committed to debt service coverage of at least one time but the debt service coverage in the fiscal year that ended June 30 was an unaudited 0.74 times, according to the EMMA filing. While the school had committed to at least 45 days of cash on hand, it had an unaudited 19 days cash on hand as of June 30.

The school’s debt service coverage ratio may be a technical default, as the bond official statement said, “If the coverage ratio falls below 1.00 to 1.10 for any fiscal year, the lessee shall be deemed to be in default under the lease agreement.”

The chief financial officer of BCCA Properties filed a statement to EMMA in mid-August accompanying the reporting of the days cash on hand and coverage ratio, saying it was not in default. Bonnie Cone Classical Academy, Inc. is the sole member of BCCA Properties.

A message left with Bonnie Cone Classical Academy for a comment or explanation wasn’t immediately responded to.

The bonds affected by the covenant breaches are Series 2021A and Series 2024, both issued by Wisconsin’s Public Finance Authority. An investor conference call is scheduled on the bonds for 2 p.m. Sept. 23. More information is available on the EMMA site.

The school is located in Huntersville, North Carolina, about 15 miles north of Charlotte. The charter school reportedly has 879 students.

Of the 43 municipal bond impairments in North Carolina since 2016, 29 (67%) used Wisconsin’s Public Finance Authority as a conduit, Default Trends reported.

The breaches on days cash on hand and debt service coverage ratio should trigger the school to retain at its expense a management consultant within 45 days to provide recommendations, according to the official statement.

The bonds were sold without ratings.

In North Carolina’s performance grade system for its school systems, this system received grades of C in 2022, D in 2023 and C in 2024. The most common grade for school systems is C.