Investors Go to School on Charters

Mike Cherney:

Charter schools, publicly financed alternatives to traditional public schools, are drawing more than just increasing numbers of students: Bond investors also are signing up.
As charter schools have grown, their bond sales–which usually go toward financing construction of new facilities–have gotten bigger as well, a sign of rising interest from investors. And while the relatively high yields are burdening the schools with higher borrowing costs, they are proving particularly enticing to market participants at a time of near-zero interest rates.
Bond offerings of $30 million or more accounted for nearly 12% of all charter-school bond sales last year, compared to 5% in 2007, according to Wendy Berry, a former analyst at Moody’s Investors Service and a charter-school finance consultant for the Local Initiatives Support Corp., a community development organization. About 10% of the new deals this year have crossed that threshold.