OREANDA-NEWS. Fitch Ratings has affirmed its 'BBB' rating on approximately \$19.9 million of outstanding Louisiana Public Facilities Authority revenue bonds, series 2011 issued on behalf of Belle Chasse Educational Foundation (the foundation).

The Rating Outlook is Stable.

SECURITY

The bonds are payable by the foundation through lease payments received from Belle Chasse Academy (BCA), a charter school located on Naval Air Station-Joint Reserve Base New Orleans (the base). Lease payments constitute a general obligation of the school, payable from all legally available funds. The bonds are further secured by a leasehold mortgage over BCA's facilities and a cash-funded debt service reserve sized to maximum annual debt service (MADS).

KEY RATING DRIVERS

STABLE OPERATING PROFILE: The 'BBB' rating reflects BCA's 12-year operating history, with full and stable enrollment. Periodic turnover of on-base military personnel has not hurt enrollment levels. Academic performance remains strong.

POSITIVE OPERATIONS: BCA has a track record of positive operating margins despite some volatility in state funding. Ample demand, conservative budgeting, and good expense management have contributed to consistently positive results. BCA is highly reliant on state (75.8%, LA GO bonds rated 'AA'; Stable Outlook by Fitch) and federal (20.6%) per-pupil funding.

ADEQUATE BALANCE SHEET: BCA's cash balance provides an adequate financial cushion. Available funds (cash and investments less permanently restricted net assets) were \$8.7 million as of June 30, 2014, equal to a healthy 52.7% of operating expenses and 43.5% of debt. This level of financial cushion compares favorably to other Fitch-rated charter schools.

MANAGEABLE DEBT BURDEN: BCA's debt burden is moderately high with MADS consuming 8.3% of fiscal 2014 revenues. This is partially offset by a track record of solid debt service coverage. MADS coverage from operations has ranged from a solid 1.4x in fiscal 2010 to a strong 3.2x in fiscal 2014.

RATING SENSITIVITIES

CHARTER-RELATED CONCERNS: Substantial reliance on enrollment-driven, per pupil funding, and charter renewal risk are credit concerns common among all charter schools which, if pressured, could negatively impact the rating.

FUNDING VOLITILITY: BCA's location on the base makes it susceptible to military staffing, base utilization, and federal funding generally. State funding levels are potentially susceptible to budget pressures and continued legal challenges of charter funding. Fitch believes BCA is equipped to manage through moderate funding volatility and does not anticipate any adverse impact to its credit profile at this time.

CREDIT PROFILE

Opened in 2002, BCA serves grades K-8 and was the first charter school established on a military installation. Its initial five-year charter was granted in 2001 by the Louisiana State Board of Elementary and Secondary Education (BESE) and was renewed for 10 years in 2007. BCA students continue to score well on the Louisiana standardized tests and BCA continues to receive an 'A' letter grade from BESE for the 2013-2014 academic year. BCA's limited charter renewal history is mitigated by the 10-year term of its charter, the solid academic performance of its students, and the positive relationship it maintains with its authorizer.

BCA currently enrolls 931 students in grades K-8, in line with 936 students at this time last year (Feb. 1, 2014 count). The school's enrollment generally fluctuates somewhat during the year due to shifts in the base's population. BCA maintains an actively managed waiting list, 148 students presently, which is available to fill vacancies arising as a result of routine military deployments/relocations. BCA's ability to minimize the impact of such enrollment turnover is viewed positively by Fitch. Moreover, the base's growth over the past few years reflects the strategic role it plays in the southeast region of the country.

POSITIVE OPERATIONS

BCA has generated operating surpluses for each of the past five fiscal years, with an average operating margin of 9.2%. Operations have been driven largely by stable enrollment and a generally favorable funding environment. A strong 14.9% surplus in fiscal 2014 reflects an increase in state per-pupil funding, whereas BCA had expected and prepared for lower funding levels. In addition, BCA had conservatively budgeted additional contingency funds for a contractor dispute, but the matter was settled at a much lower cost to BCA. Interim results show that BCA is on track for another operating surplus in fiscal 2015, though likely more in line with historical levels.

Despite positive results, BCA is highly reliant on state and federal revenues, which account for 75.8% and 20.6% of operating revenues, respectively. However, Fitch believes BCA has ample flexibility to manage through potential threats to funding levels, which might include state budget pressures, a lawsuit challenging the state's funding of certain charter schools, changes to military funding, or general federal budget pressures. In response to funding cuts, BCA could increase enrollment from the waitlist (up to 1,200 allowed by charter), utilize cash reserves, or adjust staffing levels. Fitch views BCA's conservative budgeting practices and good expense management favorably, especially in light of continued academic success and adequate balance sheet cushion.

ADEQUATE BALANCE SHEET CUSHION

BCA's balance sheet resources continue to provide an adequate financial cushion to manage unexpected increases in operating expenditures and/or decline in enrollment-related per pupil funding. Available funds totaled \$8.7 million as of June 30, 2014, up from \$5.9 million as of June 30, 2013. Available funds covered fiscal 2014 operating expenses (\$16.4 million) and outstanding debt (\$19.9 million) by 52.7% and 43.5%, respectively. These liquidity metrics are acceptable for the rating level and are unusually strong for a sector typically characterized by very limited balance sheet resources.

MANAGEABLE DEBT BURDEN

Pro forma debt service (\$1.6 million) is level through final maturity of the bonds in fiscal 2041. Debt service represented a moderately high 8.3% of fiscal 2014 operating revenues (\$19.3 million). Based on BCA's track record of operating surpluses and lack of additional debt plans, Fitch expects the school's debt burden to remain manageable. Outstanding debt-to-net income available for debt service was a moderate 3.9x for fiscal 2014, also comparing favorably to most other Fitch-rated charter schools. In addition, BCA generated sound MADS coverage from operations of at least 1.4x in each of the past five fiscal years. For fiscal 2014, MADS coverage was a solid 3.2x due to particularly strong operating results. BCA has no additional debt plans.