News Story

New York, May 12, 2022 -- Moody's Investors Service has assigned a Baa3 underlying and Aaa enhanced rating to International Leadership of Texas' approximately $111.6 million Education Revenue Bonds, Series 2022. The bonds are issued by the Clifton Higher Education Finance Corporation, TX on behalf of the charter network. Moody's has also affirmed the previously assigned Baa3 rating on the organization's Series 2021 debt. The outlook remains stable. Following this issuance, the charter network will have roughly $668 million of charter revenue debt outstanding.

RATINGS RATIONALE

The Baa3 rating is based on the charter network's large and growing scale of operations, fueled by its advantageous locations within Texas' rapidly growing metropolitan areas. Academic performance based on standardized testing is broadly comparable to competitors, though its unique offerings, such as a trilingual program, provide a competitive edge. Charter renewal risk is minimal considering current performance on authorizer metrics and a generally supportive environment within the state. Financial performance has historically been uneven, though the network's budgetary performance and liquidity is now a credit strength. Days cash on hand is a healthy 129 days as of fiscal 2021 and is expected to be maintained going forward. These factors are weighed against an elevated debt profile which will remain so due to an extended maturity schedule combined with continued issuances expected to fuel future growth.

The Aaa enhanced rating is based on the rating of the Texas Permanent School Fund (PSF) and the structure and legal protections of the transaction which provide for timely payment by the PSF if necessary. Moody's currently rates the Texas Permanent School Fund Aaa.

RATING OUTLOOK

The stable outlook reflects our expectation that the charter network will maintain healthy liquidity relative to its operations as enrollment grows over the next several years, however elevated debt will remain a constraining factor for the foreseeable future as the charter school continues to rapidly expand.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Reduced leverage and improved debt service coverage

- Continued improvement in liquidity relative to operations

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Draws on liquidity, particularly if caused by operational issues or difficulties making debt service payments

- Deterioration of competitive profile (waitlist, enrollment, etc.) due to increased competition or reduced performance

LEGAL SECURITY

The bonds are special limited obligations of the Clifton Higher Education Finance Corporation, secured solely by revenues derived from a loan agreement with International Leadership of Texas. The charter network's principal source of revenue is state funding derived from its charter school operations. The school has also executed a deed of trust pledging all owned real estate as security for the debt.

USE OF PROCEEDS

Bond proceeds will be used to continue the charter network's expansion campaign, including new instructional facilities.

PROFILE

International Leadership of Texas (ILTexas) is a K-12 charter school organization that operates 33 schools on 20 campuses located in the Dallas/Fort Worth and Houston/College Station metropolitan areas. The organization has experienced rapid growth and currently serves 21,000 students.

METHODOLOGY

The principal methodology used in the underlying ratings was US Charter Schools published in September 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1039451. The principal methodology used in the enhanced rating was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1068154. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Alexander Rawlings
Lead Analyst
REGIONAL_SOUTHWEST
Moody's Investors Service, Inc.
Plaza Of The Americas
600 North Pearl St. Suite 2165
Dallas 75201
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Roger Brown
Additional Contact
REGIONAL_SOUTHWEST
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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