Equitable School Revolving Fund LLC, the first lending pool for charter schools, plans to bring $300 million of A-rated social bonds to market next week.
The deal, which is expected to be priced on Wednesday, will be the fund’s sixth borrowing, said Anand Kesavan, CEO and founder of Equitable Facilities Fund. The company’s most recent deal was signed last November for a total of $230 million.
“Our plan, which we’ve communicated to investors all along, is that we’re going to execute every year, and that’s our pace,” Kesavan said.
Anand Kesavan, CEO and founder of Equitable Facilities Fund, said that in addition to lending to top-performing schools in the charter school sector, the company aims to increase transparency across the charter school sector.
fair facilities fund
He said the team planned numerous one-on-one meetings with investors prior to the deal. Kesavan said that while many investors focus on debt, they also leverage the fund’s information and data on the charter school sector in general.
“Charter schools are hard work,” he says. “We tend to share our perspectives on the charter school market. Part of our mission is to increase transparency in the charter school sector.”
As part of its portfolio management, the fund provides best practice training and seminars for schools and provides early intervention to manage issues, according to Investor Roadshow.
Kesavan said the company has a strict screening process and only provides loans to schools that are high performing and financially stable. That helps keep default rates at zero, he said.
Founded in 2017, EFF is a 501(c)(3) nonprofit corporation created to provide low-interest loans to public charter schools across the United States. EFF is the only member of the Equitable Schools Revolving Fund.
Proceeds will be used to make new loans and repay loans already made within the ESRF.
The portfolio includes 90 loans to 80 charter school organizations and mandated groups across 23 states. The pool has more than $1.5 billion outstanding and is secured by $1.3 billion in senior lien notes and debt reserves, according to Investor Roadshow.
This financing is divided into two proposals. The $200 million will be priced through the Arizona Industrial Development Authority and will provide loans to schools across the country. The $100 million will be priced through the California Infrastructure and Economic Development Bank, which will fund the loan only. To school in California.
According to the investor roadshow, the borrowings are structured as bullet bonds with maturities of 30 and 35 years and five years.
Siebert Williams Shank & Co., LLC is a senior underwriter. PNC Capital Markets Inc. is co-senior, with RBC Capital Markets Inc. and Stevens Inc. rounding out the syndication. Orrick, Herrington & Sutcliffe LLP is the Fund’s debt advisor and Lamont Financial Services is its financial advisor. Kestrel has certified this bond as social.
The bond has been rated A by S&P Global Ratings, the only agency that rates bonds, with a favorable outlook. Analysts said the positive outlook “reflects the trend of increasing loan portfolio diversification, with more loans being added to the pool each year,” which strengthens the pool’s ability to withstand default stress. He said that
S&P said the fund’s structure as a nonprofit organization with no government ties was a limiting factor.
According to Roadshow, the loan pool can withstand a default rate of 38.4% and continue servicing senior notes subject to at least 46% loan repayment recovery.
“It’s such a huge shock that it’s almost illogical for us to be able to endure it,” Kesavan said.
