Fulton Science Academy Bonds Downgraded
The failure of Fulton Science Academy Middle School to get a state charter led to the latest drop to a 'C' rating.
Fitch Ratings again has downgraded the rating on the $18.9 million in bonds for Fulton Science Academy to "CC" from "B," according to BusinessWire.
Fulton Science Academy Middle School's failure to get either a charter renewal from Fulton County or a state charter led to the downgrade of the Development Authority of Alpharetta educational facilities revenue bonds.
Fitch said in the release that lack of management cooperation left it unable to determine if the middle school's proposed conversion to a private school was feasible, and its possible effects on the Fulton Sunshine Academy and Fulton Science Academy High School. All three schools are obligated for the bonds.
Fitch won't be issuing analysis or further ratings because Fulton Science Academy's management said it won't be participating in the process.
The ratings service release gave three main reasons for the downgrade, starting with its opinion that default appears probable because the middle school has no statutory recourse to remain open as a charter school beyond June 30. Its closure would likely result in an immediate event of default as defined in the loan agreement for the bonds, the release said. The trustee could implement accelerated redemption provisions.
As Fulton Science Academy Middle School has no statutory alternative to get a charter by June 30, Fitch said "This violates a covenant in the loan agreement between FSA and the issuer. The loan agreement specifies that any violations of covenants are events of default."
If it goes into default, Fitch doesn't think Fulton Science Academy could cover the debt.
According to a March 31, BNY Mellon statement of accounts, $13.1 million of the $18.9 million in bonds remained. Fulton Science Academy told the state Board of Education in a letter that it estimated $1.5 million in cash reserves were available at all three schools as of May 4.
"Should the bonds become immediately due and payable, Fitch does not believe FSA could immediately liquidate resources to fill the $4.3 million gap," the release said.