FY 2024 Independent School Sector Report Summary
At the Board of Directors Meeting held on February 19th, Ms. Johnson presented a review of CHEFA’s Independent School Sector report, which included financial operating results for FY 2024 and market demand results for FY 2025. This sector report reviewed the performance of 33 independent schools (22 boarding schools and 11 day school) that comprise CHEFA’s independent school portfolio, consisting of 52 bond series with $747.7 million outstanding. Private placement offerings for the sector continue to dominate comprising 74.8% of total debt outstanding, compared to 25.2% ten years ago.
Demand: Total student demand trends remain strong with an average 3.1% increase in applicant volume and enrollment over the past five years. Application volume remains strong among the boarding schools, at is second highest level in FY 2025 in the past five years (up 5.4% from FY 2021), resulting in an improved median selectivity rate during this time. The day schools however experienced a 5.6% decrease in applicant volume contributing to more schools becoming less selective over the past five years. Matriculation rates increased for the majority of the portfolio (mostly attributable to the boarding schools), supporting a steady increase in total enrollment in each of the past five years.
Key Financial Ratios: FY 2024 financial results reflect a stable view of the sector despite weakened operating performance, as the sector continues to maintain steady demand, manageable debt service and increased financial wealth. Despite a 29.1% increase in the net tuition revenue median, the EBIDA margin median decreased from 18.5% in FY 2020 to 15.1% in FY 2024. The portfolio is still considered leveraged but remains manageable across the sector with a lower debt service burden median of 3.3% and a strong debt service coverage ratio median at 3.3 times.
Total cash and investments have increased significantly from five years ago resulting in a 27.9% in the total endowment median since FY 2020. The FY 2024 total cash and investments to debt median of 3.4 times has increased 17.2% over the past five years but lags its high of 3.8 times in FY 2021. The total cash and investments to operations median improved from 1.9 times in FY 2020 to 2.3 times in FY 2024 and is traditionally much stronger amongst the boarding schools (at 3.1 times in FY 2024 compared to 1.5 times for the day schools). 19 institutions had at least a favorable 2.0 times coverage in FY 2024 while three institutions had less than a one-year’s cushion for operations. The FY 2024 monthly days cash on hand median of 398 days lags its high of 413 days in FY 2021 but remains 10.2% higher than from five years ago. FY 2024 individual medians of the private institutions varied significantly from a low of 50 days to a high of 1,241 days.
Total capital investment for the portfolio, increased 57% over the past five years with 61% of the portfolio investing more in their plant than their annual depreciation expense in FY 2024 compared to only 36% from five years ago. The FY 2024 median capital spending ratio of 1.29 times increased steadily from its low of 0.57 times in FY 2021 and is at its highest level over the past five years.
To learn more about CHEFA’s Independent School Sector report for FY 2024 and the performance of its 33 private schools that make up our independent school portfolio, please contact Krista Johnson, Senior Credit and Compliance Specialist at kjohnson@chefa.com.
