Summary: Arlington Higher Education Finance Corp., Texas A.W. Brown Fellowship Leadership Academy; School State Program

S&P Global Ratings lowered its underlying rating to 'BB-' from 'BB' on Arlington Higher Education Finance Corp., Texas' series 2016 and 2017 education revenue bonds, issued for A.W. Brown Fellowship Leadership Academy (A.W. Brown). The outlook is stable. The 'AAA' long-term program rating on the series 2016 and 2017 bonds reflects our view of A.W. Brown's participation in the Texas Permanent School Fund (PSF) Bond Guarantee Program, which provides the security of a permanent fund of assets that could be used to meet debt service on the series 2016 and 2017 bonds. For more information on the long-term program rating, please see our report "Texas Permanent School Fund State Revolving Funds/Pools" (published June 7, 2019, on RatingsDirect). The lowered underlying

...stand-alone credit profile of '##-' and a final rating of '##-.' The rating further reflects our view of: + The sharp enrollment decline in fall 2019 and negligible wait list; + A.W. Brown's volatile operating trends, with an operating deficit on a full-accrual basis in fiscal 2019 and a modest surplus budgeted for fiscal 2020, though we are unsure if the school will meet this expected level; + A.W. Brown's weak MADS coverage of 0.80x in fiscal 2019 based on S&P Global Ratings' calculation, although it was in compliance with the covenant requirement after adjusting for one-time expenses; + Significant changes in the board, management, and teaching staff at the school in fiscal years 2016 through 2018, which pose a material transition risk; + The weakened academic performance of the Redbird campus, rated at "D," despite the overall accountability rating of "C" for A.W. Brown; and + The uncertainty associated with charter renewal and revocation risk, as with all charter schools, given that...

Summary