Record-Breaking $346 Million Bond Deal for Charter School

Courtesy IL Katy

The International Leadership of Texas (ILTexas) has accomplished the largest-ever single bond transaction in the history of charter schools. IL Texas has a campus on Franz Road in Katy.

The school will break a new record by selling approximately $346 million in bonds to purchase 13 ILTexas campuses across the state. This transaction follows on a $55 million private bond deal in September 2018 to purchase campuses in Grand Prairie and Katy, Texas, and before that, a record $111 million deal to acquire its original four schools in 2015.

“Unprecedented is a word that seems to describe us pretty well. It was unprecedented when we opened as the largest charter school in 2013, unprecedented when we sold $110 million in bonds in 2015, we have experienced unprecedented growth since our founding, and now have another unprecedented bond sale,” said ILTexas CEO Dr. Alan Seay. “Being able to buy out all these leases with one transaction is a tremendous benefit for the long-term health of our organization and will allow us to continue to provide extraordinary educational opportunities to our students and parents.”

Unlike traditional public-school districts that receive additional funding through local taxes for the construction of campuses, charter schools are required to use funds from their operations budget to pay for facilities. Because of that many charter schools seek innovative strategies for school facilities.

Since its launch in 2013, ILTexas contracted with property developers to build their modern, state of the art campuses. The developers fronted all the costs of site purchase, site development, and campus construction. Then they leased the campuses back to the charter school using leases that provided financial incentives to the school to purchase the schools two – five years after construction. The two bond transactions in 2018 are a continuation of that strategy and will result in ILTexas being the sole owner of all its campuses.

“The main motivation for issuing such a large bond issue is to purchase facilities that are currently owned by developers with lease structures with annual payments and acquisition prices escalating 2.5% annually,” said ILTexas financial advisor Drew Masterson, managing director of Masterson Advisors.

In preparation for the bond sale, ILTexas CEO Dr. Alan Seay, Superintendent/Founder Eddie Conger, and CFO Ronald Kuehler met with dozens of potential investors, who provided very positive feedback and who were impressed by the school’s development and unique approach to education. BB&T Capital Markets served as the bond underwriter for this transaction and designed the entire marketing strategy.

Rob Nickell, Managing Director for BB&T Capital Markets, stated, “I think we had a terrific team and worked very well with all parties to present a positive story for our investors. Obviously, the investors believe in the school and what it is doing for the young people of Texas.”

The previous record for largest single charter school issue of $192 million came from American Leadership Academy Inc. in Arizona in 2017 through the Pima County Industrial Development Authority.


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