💥New Chapter 11 Bankruptcy Filing - Charter School Capital Inc.💥
Charter school financing company files in the District of Delaware
This one’s random AF but these days we’ll take anything over biotech or solar, 👍.
Back on June 6, 2025, Oregon-based Charter School Capital Inc. (“CSC” or the “debtor”) filed a chapter 11 case in the District of Delaware (Judge Goldblatt); it is a consultancy that supports the charter school industry by providing development, financing, and other services to charter school leaders across the US* through its three creatively named, 🙄, business segments:
📍“Money To Buy Your School.” LOL. Pursuant to this segment, the debtor acquires various properties through special purpose entities (“SPEs”) via debt and equity financing and then leases the property to charter schools. The debtor currently owns and manages eight properties throughout the country.
📍“Money To Run Your School.” LOLOL. Through this non-debtor subsidiary, Public Charter School Receivables Company, LLC, CSC provides receivables financing to schools, financed via a Bank of America N.A. (“BofA”) note purchase agreement.
📍“Kids To Fill Your School.” LOLOLOL. This segment name stirs a whole lot of “ick” for a “marketing” arm. The debtor provides services like enrollment marketing and website support to charter schools.
So what went wrong? To answer that we need to dive a little deeper into the debtor’s business, specifically the Money To Buy Your School segment … which has a weird municipal finance component.
That’s right. Municipal finance.
The debtor’s business model relies upon exiting real property investments by selling them to charter schools (or other non-profit organizations) who finance their purchase of said real property through the issuance of municipal bonds. That’s right: it turns out that the municipal bond market is a very popular source of funding for charter schools because the cost of getting a school up and running can be significant and a good chunk of expenditure gets sunk into land/construction. Indeed, it’s so popular that the fine folks at Orrick, Herrington & Sutcliffe LLP have actually published a lengthy primer on it. Enjoy your summer reading, y’all!
The debtor, of course, isn’t eligible to issue muni bonds itself. Instead, it offers charter schools a ready-to-go school that allows founders a low-friction way to get things off the ground with minimal upfront commitments. All the charter schools need to do is enter into a lease agreement with the debtor.
According to the National Center for Charter School Accountability, ~26% of charter schools shut down within five years of opening, so a lease agreement can be a popular way to “test the waters” so to speak. But if the charter school did prove to be successful, it could then move to secure municipal bond financing and purchase the property from the debtor. In other words, the municipal bond market is crucial for charter school growth. Unfortunately for the debtor, the municipal bond market — particularly that portion of it backing charter schools — has seen better times:
In ‘24, the municipal market recorded 185 impairments, the most since ‘21, and 45 of those impairments were attributable to charter schools, 😬. Per Bloomberg:
“A combination of factors drove the troubles for charter schools. Inflationary pressures, a dwindling pool of students due to the declining birth rate and the roll-off [of] Covid-era stimulus dollars weighed on the sector. Higher interest rates made debt restructurings more difficult and inflation increased labor costs.”
No. Bueno. Someone call Elon Musk! We need some babies to service the muni debt, y’all!
So in the face of these headwinds, the debtor brought on two restructuring veterans Edward Weisfelner** and Craig Jalbert*** to form a restructuring committee. As part of their mandate, the restructuring committee was tasked with evaluating possible strategic alternatives.
And in April ‘25, a potential acquirer approached the debtor. Unfortunately, after some due diligence, the potential acquirer decided that it would prefer an in-court 363 sale instead, which brings us to the petition date. The debtor, with the help of its financial advisor, Rock Creek Advisors LLC (“Rock Creek”), filed with a plan to run a 38-day process, hoping that the potential acquirer would step up and become the stalking horse purchaser.
To fund that process, the debtor originally planned to use its $1.29mm cash balance and money generated through its ordinary course business operations — including revenue from the Money To Run Your School segment. Since the petition date, however, BofA had other ideas; it declined to provide any further funding, effectively handicapping the debtor.
The restructuring committee had no choice but to unleash Rock Creek to turn over every stone for financing.
Which it did! Rock Creek ultimately came back with a singular binding proposal from East West Bank ($EWBC) for a $5mm new money DIP facility of which $2.5mm is available on an interim basis with the remainder available upon a final order. The DIP matures on August 6, 2025 and carries a 12% interest rate PIK, 2.5% upfront fee, 5% exit fee, and a 2% maturity extension fee (if necessary).****
But that’s not all. The stalking horse bid also came through. On July 2, 2025, the debtor filed a notice of stalking horse bidder — New GS, LLC, an affiliate of American Infrastructure Partners, with a $80.7mm stalking horse bid.
We now look forward to a July 16 bid deadline and a July 25 sale hearing at 3pm ET.
The debtor is represented by Goodwin Procter LLP (Howard Steel, Kizzy Jarashow, Stacy Dasaro, James Lathrop) and Potter Anderson & Corroon LLP (Aaron Stulman, Brett Haywood, James Risener III, Ethan Sulik) as legal counsel, Rock Creek Advisors LLC (Brian Ayers, Jim Gansman, Tim Peach) as financial advisor, and its restructuring committee is made up of Edward Weisfelner and Craig Jalbert. East West Bank is represented by Norton Rose Fulbright US LLP (Robert Hirsh, Francisco Vazquez) and Morris James LLP (Eric Monzo, Jason Levin) as legal counsel. Orthogon Charter School Special Opportunities LLP, Orthogon Charter School Special Opportunities II, LP and Orthogon Charter School Special Opportunities III, LLC are represented by Beys Liston & Mobargha LLP (Joshua Liston) and Landis Rath & Cobb LLP (Matthew McGuire).
*The debtor was founded by former Bain & Company consultant, Stuart Ellis, who has previously dabbled in random ventures like trading cards and pop rocks. No seriously, from his bio:
“Stuart was — what he calls — a ‘lemonade-stand kid,’ always finding creative solutions and serving the needs of the community. As a grade schooler, he made a business selling Pop Rocks to his classmates on the playground.”
Good thing this case is flying under the radar. The X crowd is merciless when it comes to the strategic consultant types, especially when it’s a former Pop Rocks hustler as well. The memes would’ve been incredible.
**Sheesh. Smoke em’ if you’ve got em’.
***This is a name that’s been popping up quite a lot this year, see, e.g., here and Cold Spring Acquisition LLC.
****The debtor has no funded indebtedness but has guaranteed certain obligations of an indirect non-debtor subsidiary in an amount of $8.5mm. Right beneath that sits ~$700k in unsecured trade debt and a $3mm arbitration claim obligation that originates from a prepetition dispute with a preferred shareholder. The arbitration claim obligation is the result of prepetition preferred shareholders, Orthogon Charter School Special Opportunities LLP, Orthogon Charter School Special Opportunities II, LP and Orthogon Charter School Special Opportunities III, LLC (“Orthogon”), disputing a sale and refinancing transaction the debtor undertook in November ‘24. There were also issues with the debtor providing Orthogon with erroneous financial due diligence related to a preferred share issuance.
Company Professionals:
Legal: Goodwin Procter LLP (Howard Steel, Kizzy Jarashow, Stacy Dasaro, James Lathrop) and Potter Anderson & Corroon LLP (Aaron Stulman, Brett Haywood, James Risener III, Ethan Sulik)
Restructuring Committee: Edward Weisfelner, Craig Jalbert
Financial Advisor: Rock Creek Advisors LLC (Brian Ayers, Jim Gansman, Tim Peach)
Claims Agent: Epiq (Click here for free docket access)
Other Parties in Interest:
DIP Lender: East West Bank
Legal: Norton Rose Fulbright US LLP (Robert Hirsh, Francisco Vazquez) and Morris James LLP (Eric Monzo, Jason Levin)
Orthogon Charter School Special Opportunities LLP, Orthogon Charter School Special Opportunities II, LP and Orthogon Charter School Special Opportunities III, LLC
Legal: Beys Liston & Mobargha LLP (Joshua Liston) and Landis Rath & Cobb LLP (Matthew McGuire)