Zeta Charter Schools

The Financing

Baird secured $167 million in bond financing for Zeta Charter Schools for their new high school located in the South Bronx. To take advantage of lower short-term interest rates, over half of the issue was sold utilizing a 10-year “bullet” structure while the remaining amount was issued over a traditional 40-year term. Baird approached the network with the idea of taking advantage of a steep yield curve (a 178 basis point difference between the 10-year MMD and the 40-year MMD) at the time of pricing. This split structure provides the school with over $1 million in annual savings in the first 10 years to be utilized for other operating expenses as the high school grows enrollment. Both series contained an 8-year par call.

Despite a rating downgrade from ‘BB+’ to ‘BB’ along with adding aggressive security features, Baird received orders from 24 separate institutional investors totaling just over $800MM. Notably, the short-term series received 3x the orders (about $250MM of orders for $86MM of bonds). This is a testament to the network from investors that they were not concerned about Zeta’s ability to refinance this portion of debt. Ultimately, these efforts resulted in an oversubscription in several key maturities and a reprice of 5-12 basis points during the order period.

The Project

Zeta will open its first high school at 261 Walton Ave, Bronx, New York (the South Bronx High School Campus). The school will acquire a parcel of land (approximately 25,182 square feet) from a 3rd party and construct a ±152,000 square foot high school facility that will house approximately 1,080 students in grades 9-12. Students will matriculate to the high school from Zeta South Bronx and Zeta Tremont Park. The facility will be owned by an affiliate of Zeta and leased to the network.

The Zeta Network

Zeta Charter Schools is a New York City-based charter school network that opened their doors in the fall of 2018, and Zeta currently operates 11 elementary and middle schools under 7 different charters serving students in PK-8th grade. Zeta is on a mission to ensure that every child in America has access to the highest-quality, free education from pre-kindergarten through twelfth grade. The school is driven by rigorous academics, mind-body-heart cultivation, innovation culture, and wow through family service. Demographics contain 99.7% students of color, 86.6% students with free or reduced-price lunch, and 15.7% English Language Learners. Academic assessments rank Zeta in the top 3 of NYC Charter Schools in both Math and ELA surpassing the districts average by over 50%. High demand with over 9 applications per available seat coupled with consistent student retention over 90%. Current enrollment of nearly 4,000 students with organic growth plans to surpass 8,000 students by FY30.