The Los Angeles Unified School District issued $384 million in bonds to fund projects aimed at improving its security and enrollment.
The bonds mature between 2024 and 2038, yielding between 3.1% and 3.76%. They pay interest at 5%. The securities received a rating of A2 from Moody’s Investors Service and A- from Fitch Ratings.
The rating “reflects the district’s currently strong reserve position, moderate long-term liability burden, and multi-year track record of compliance with state and board reserve requirements within the context of strong state oversight,” according to Fitch.
The plurality of the bond proceeds, about $166 million, will finance cybersecurity improvements. An additional $146 million will fund traditional security improvements, such as the installation of video cameras. The issuance comes a year after the school district became victim to a ransomware attack which leaked at least 2,000 student records.
Meanwhile, the district is struggling with falling enrollment and growing costs. Budgeted average daily attendance fell to 424,434 for the 2022-23 academic year, down from an actual attendance of 454,848 in 2019-20. In May, the school district approved a contract negotiation with the Los Angeles teachers union that will raise teacher salaries by 21%.
The school district will also spend $81 million of the proceeds on purchasing 180 electric school buses. The securities have been designated as “sustainability bonds.”
Educating more than 400,000 students from kindergarten through 12th grade, the school district is the second largest in the United States. (New York’s is the largest). The bonds are secured by lease payments.
BofA Securities, Inc and RBC Capital Markets, LLC served as lead underwriters on the issuance, purchasing the bonds for more than $424 million. The price reflected a net issue premium of $40 million.