DISTRICT OF COLUMBIA
KIPP DC Issue
Wye River Group Served as KIPP DC’s Independent Financial Advisor for this Transaction.
Wye River has served as KIPP DC’s independent financial advisor on numerous transactions over the past 12 years.
In February 2019, KIPP DC acquired the campus of Somerset Prep Public Charter School. KIPP DC assumed responsibility for operating two charter schools at that location commencing school year 2019/20. Operations at that location include a Middle School (KIPP DC Honor Academy) which serves students in grades 4-8 and a High School (KIPP DC Somerset College Prep) which serves students in grades 9-12. Targeted enrollment for school year 2019/20 including Somerset is 6,800 students.
In connection with the Somerset acquisition, KIPP DC secured $45MM of taxable bank financing, approx. $25MM of which was drawn at the closing of the Somerset acquisition.
The Series 2019 Bonds financed two renovation projects – Somerset Campus Renovation ($20 million) and Benning Road Campus Expansion ($20 million) as well as refinanced the taxable bank financing secured earlier in the year.
In April of 2019, Wye River conducted a broad-based solicitation which included over 60 banks and 30 alternative financing providers as well as a select group of underwriters for up to $135 million of potential tax-exempt bond financing. KIPP DC received 13 _________ proposals and ultimately elected to pursue a capital markets-based financing led by Baird and supported by Citi (the same team that underwrote KIPP’s Series 2012 Bonds). The Series 2019 Bonds priced in mid-October and the sale was extremely successful. The following are a few highlights of the sale:
- All-In TIC of less than 3.5% (over 65 BPs lower than its most recent issue in 2017 which was also a great outcome at the time)
- 14x oversubscribed (more than $888 million in orders)
- 4% coupons on select maturities saved KIPP about 20 basis points or ~$120K in annual debt service
- DSRF sized at 50% MADS saved KIPP ~$100K in annual debt service
In connection with the issuance of the Series 2019 Bonds, KIPP DC maintains its BBB+ credit rating from S&P (and continues to be rated among the highest rated charter schools in the nation). With this rating, we estimate that KIPP DC’s cost of capital is approximately 130 BPs lower than the average charter school nationally. This results in significant annual and present value savings which KIPP DC can use to reinvest in the classroom.