“What can I say? HJ Sims jumped in to save the day when our first banker dropped the ball midway through the bond process to fund our new school. Rob Nickell worked closely with our single investor to ensure that they would fund the entire $25 million project and Kaiti Wang was there all along to make sure that all the details were managed. This wouldn’t have happened without them. Lifesavers indeed!”
-Craig Merrill, Executive Director of Pathways to College (PTC)
Pathways to College (“PTC”) is an independent charter school in Hesperia, California opened in 2001. After operating for more than 20 years on leased facilities, PTC desired a campus of its own that would support the needs of its current and future students. 387 students in transitional Kindergarten to 8th grades attend the school today, and enrollment is projected to grow to 575 students by 2025-26.
Authorized by the Hesperia Unified School District, PTC was on a two-year charter term through 2023 which was automatically extended through June 30, 2025 via state legislation.
The mission of Pathways to College K8 is to provide all students with a safe and challenging learning environment that emphasizes college preparation. PTC will create a culture that promotes academic growth, social-emotional maturity, and positive behaviors.
Bringing the school one step closer to realizing its goal of a new school building, the Series 2023 Bonds proceeds of approximately $25 million were used to refinance the acquisition of land and fund the construction of a 64,577 sq. ft educational building with 18 classrooms, an additional 18 modular classrooms, and related site improvements. Structured with the construction and transition period in mind, and to create the lowest practical debt service, HJ Sims structured the bonds with a 40-year amortization, level debt service, capitalized interest through the construction period, and the flexibility of an 8-year optional call at 102%, declining to par by 2033.
The issuer California School Finance Authority (CSFA) provided a $2 million grant that funded the bulk of the debt service reserve fund requirement, reducing the borrowing amount needed and making the deal more affordable for PTC.
By structuring the bonds with a lease between the School and an LLC holding title to the property, PTC can be eligible for the state’s Charter School Facility Grant Program. Also known as SB 740, the program provides facilities funding to eligible schools in the form of a per-pupil lease cost reimbursement up to a maximum of 75% of the rent.
The $25,110,000 bond issue was issued in two series, one long-term tax-exempt series and one 6-year taxable tail.
HJ Sims sought successfully for approval of the financing and project from the CSFA issuing authority, which comes with the added benefits of a state-intercept prized by bondholders and the generous debt service reserve fund grant of $2 million.
HJ Sims considered potential long-term investors to fund the project and opted to pursue a deal with an institutional investor willing to purchase the entire amount of bonds needed for the project.
The $24,705,000 tax-exempt bonds consist of 3 term bonds: 20-year at a coupon of 7.25%, 30-year at 7.375%, and 40-year at 7.50%. The $405,000 taxable bonds consist of one 6-year term bond at a rate of 7.50% due in 2033. All bonds were priced at par.
On September 14, 2023, HJ Sims closed on the $25.1 million Series 2023 Bonds with the entire issuance purchased by an institutional investor. Once the construction project is completed in the summer of 2024, PTC will move into its new campus at the start of the 2024-25 school year.
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