Date: December 2019
Location: Houston, Texas
Financing Amount: $176,260,000
Financing Type: Bond issuance

Riverwalk Education Foundation, Inc. is a nonprofit that was incorporated in the state of Texas in 2002. Beginning with its first location in San Antonio in 2005, Riverwalk now operates 11 charter school campuses located in San Antonio, Corpus Christi, Houston and Sugarland, Texas.

And that’s just the beginning.

With a focus on science and technology, the organization has developed an aggressive growth strategy that includes acquisition of 10 more campuses by the end of 2020. By the 2023-2024 school year, it plans to expand to at least 20 schools. These future campuses hope to serve approximately 11,000 students ranging from pre-kindergarten to 12th grade in high-need neighborhoods.

In addition to physical growth, Riverwalk plans to advance its success rates so that at least 80% of all Riverwalk students achieve satisfactory performance on the STAAR Reading/English Language Arts and Mathematics assessments and a 95% college matriculation rate. In addition, the goal is for 95% of students to report a high level of belonging and engagement in progress surveys.

Maintaining an underlying investment grade rating allows Riverwalk access to the Texas Permanent School Fund that guarantees repayment of debt. As a result, the debt received a “AAA” enhanced rating, providing lower interest rates and tighter spreads — which reduces Riverwalk’s debt service costs and allows the schools to spend more money on student programming and less on facilities costs. 

When Riverwalk sent out requests for proposals, PNC’s dedicated national charter school practice responded with a unique approach that offered access to both conventional financing and bond underwriting.

Ultimately, the charter school relied on a tax-exempt bond issuance based on their needs and market conditions. Also, given the large number of construction projects financed by the bonds, PNC Bank, N.A. provided a $20 million line of credit to fund any potential cost overruns or additional capital projects not contemplated in the bond issue. This facility will continue to offer Riverwalk maximum flexibility as they expand.

PNC Capital Markets LLC was named as the senior managing underwriter for the $176,260,000 bond issuance, which was the second largest tax-exempt charter school bond transaction of 2019.

The historically low interest rate environment at the time demanded a tight deadline. Many issuers were attempting to lock in low rates before the end of 2019. This rush lead to extremely busy calendars leading up to and following the dates that the underwriting syndicate was looking to come to market. PNC proposed pricing the bonds on the Tuesday before the Thanksgiving holiday, catching the market at a critical point right before the visible supply nearly doubled.

In discussing the transaction, Mehmet Nalcaci, Superintendent and CEO of Riverwalk Education Foundation, expressed appreciation for PNC’s client-centered approach:

PNC and PNC Capital Markets gave us a choice
of structures, and their deep understanding of the capital markets and the charter school industry gave us confidence that the deal could be closed at a time that was most advantageous for us.