Charter Schools and Colleges Face Record Muni Distress in 2024
Municipal bonds from charter schools and colleges hit record distress levels, raising concerns among investors about the future of these institutions
Municipal Bonds, Charter Schools, Colleges, Investors, Debt, Inflation, United States
Bloomberg: Municipal bonds from colleges and charter schools are in big trouble this year. We’re seeing record levels of distress, with defaults hitting a three-year high.
Last year was a tough one for municipal bonds, the worst since 2021. It broke a nice streak of improvement. According to a report, there were 185 impairments, which is the highest since the pandemic shook things up.
Charter schools are really feeling the pinch, with 45 impairments, which is a record. Retirement communities and colleges also had their share of issues, with 31 and 24 impairments, respectively. This is definitely worrying for investors.
So, what’s causing all this? Well, a mix of things. Inflation is hitting hard, fewer students are enrolling because of a declining birth rate, and the Covid-era stimulus money is running out. Plus, higher interest rates are making it tough to restructure debt.
Chris Brigati, a planning director, pointed out that rising expenses and falling revenue create a tough situation. Charter schools often have lower credit ratings, and the stimulus money made them look better than they actually are.
But don’t panic just yet. Defaults in municipal bonds are still pretty rare, with a low annual default rate this year. And for those willing to take a risk, there are still investment opportunities in charter schools, which are a vital part of our education system.