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Kennedy Funding Lends $6 Million To Leading Operator Of
Charter Schools
Mosaica Education, Inc. To Use Funds For New School Openings
HACKENSACK, NJ, July
2, 2002— Kennedy Funding, a direct private lender
based in Hackensack, N.J., provided a $6,000,000 loan
to Mosaica Education, Inc., one of the nation’s largest
operators of charter schools.
Mosaica, based in New York City, was founded in 1997 by
educator Dawn Eidelman and her husband Gene. The company
operates 40 charter schools in seven states and the District
of Columbia and serves 11,000 students.
The Kennedy loan provided Mosaica with sufficient financing
to allow it to open the schools it plans to open this
fall. It was structured as a real estate bridge loan,
which will be repaid from the proceeds of the sale of
three charter school buildings that Mosaica owned and
leased to charter schools that it manages. The loan allowed
Mosaica to liquidate a portion of the equity that it had
invested in its properties prior to closing the sales.
Mosaica acquired those properties in conjunction with
its acquisition of Advantage Schools, Inc. in August 2001.
At the suggestion of JP Morgan Partners, one of Mosaica’s
investors, Rockefeller Center based Pearson Partners,
Inc. acted as Mosaica’s financial advisor in arranging
and structuring the financing. Mosaica’s other investors
include Murphy & Partners, Credit Suisse First Boston,
Bessemer Trust, US Trust, Kleiner Perkins and Fidelity.
Charter schools are increasingly relying on tax-exempt
bond financing to purchase the properties in which they
operate and, in so doing, significantly reduce their cost
of occupancy. While still small, the depth of the market
for this type of charter school bond financing has grown
significantly over the past two years and has, in many
cases, achieved investment grade credit ratings from national
credit rating agencies. These tax-exempt financings, however,
can take an extended period of time to arrange. In order
to facilitate its clients’ needs prior to the arrangement
of such acquisition bond financing, Mosaica has assisted
some of the charter schools for which it provides management
services by refurbishing and purchasing school buildings
subject to a lease to the charter school.
In a very short time period, Kennedy was able to underwrite
the risk of the closing of the sale contracts noted above,
which serve as Kennedy’s primary source of repayment,
even though the purchasers’ acquisition financings
had not been formally committed at the time Kennedy made
its loan. Kennedy quickly understood that Mosaica was
a good credit risk, offering a solid balance sheet, a
good earnings history, and multiple alternative sources
of repayment. Those factors, combined with the quality
of Mosaica’s management team and its investor sponsorship,
allowed Kennedy to provide financing to Mosaica along
more advantageous terms than Kennedy typically offers.
Indeed, since Kennedy funded its loan in early May, Mosaica
has already closed one of the real property sales and
has used a portion of the sale proceeds to reduce Kennedy’s
exposure.
Charter schools are becoming a leading solution to address
the problem of poorly performing of public school systems.
Gallup Polls and surveys by the Wall Street Journal and
NBC News have all noted growing dissatisfaction with public
education and the need for improvement. Mosaica offers
its own comprehensive curriculum and a longer-than-normal
school day as part of its structured package for managing
schools, which it provides at current district per student
spending levels.
"Studies have shown growing dissatisfaction with
public school performance across the nation, and there
is ample evidence of strong demand for the types of solutions
Mosaica offers," says Mike Bahiri, a principal with
Kennedy Funding. "We were also impressed by the depth
of investment in the firm on the part of very sophisticated
Wall Street investors, making the transaction an excellent
loan risk."
According to Michael J. Connelly, President and CEO of
Mosaica, the company chose Kennedy Funding because the
lender was able to manage the complexities of the loan,
including the underwriting of both the borrower’s
real estate assets and their business model, and was willing
to process a tremendous amount of paperwork involved in
the process. "Kennedy Funding was willing to address
a complex situation involving multiple properties and
transactions that traditional lenders were unwilling to
undertake in a very short time period," says Connelly.
"Kennedy was responsive to our needs and willing
to manage a cumbersome process."
Meeting the financial needs of companies faced with complex
situations or in financial trouble is Kennedy Funding’s
forte. The lender excels at devising innovative strategies
to resolve their clients’ financial needs. Kennedy
also has a national reputation for its loans covering
a wide variety of financial and legal situations, including
successfully dealing with commercial property workouts,
foreclosures, and bankruptcies.
Throughout its years of serving the business community,
Kennedy has compiled an enviable reputation as a resourceful,
key lender in commercial real estate projects nationwide.
In recent years, Kennedy has branched out into commercial
loans in the international arena and expanded its lending
scope to include enterprises across a wide variety of
industry categories. These industries include: commercial
real estate, resorts and lodging, media (TV and radio
stations), retail, airlines, and a diverse range of business
enterprises.
With its expertise in due diligence and risk assessment,
Kennedy Funding can support commercial investments of
virtually any type. Unlike conventional banks, Kennedy
responds to loan requests rapidly and issues decisions
immediately.
"Few lenders can match the speed of our loan turnarounds.
We can loan tens of millions of dollars in as little as
two weeks and provide a commitment in just two days. Turning
around multimillion dollar loan commitments in under 24
hours is not uncommon for Kennedy Funding," said
Mr. Bahiri.
Direct private lenders, such as Kennedy, offer numerous
advantages over traditional lenders. These include quick
responses to loan requests, diverse experience, flexibility
in loan configuration, and the ability to devise innovative
solutions to a broad range of lending scenarios. Staffed
by experienced loan officers and risk analysis experts,
Kennedy Funding is able to make fast, accurate loan decisions.
"While most lenders see handing you the check as
the close of the deal, we see it as the beginning,"
says Bahiri. "We provide clients with personalized
service and professional advice to maximize their financial
opportunities. Few lenders do this, but we view the lending
process as a complete cycle with as many issues at the
end of the cycle as the beginning. By working closely
with the client throughout the process we can ensure a
higher rate of success for them as well as us."
Bahiri says that too many lenders fail to recognize the
strategic importance of timing, allowing red tape and
bureaucratic processes to delay loan closings. "In
today’s global, fast-moving marketplace, it is critical
to respond quickly. That does not mean you need to throw
caution and prudent action aside to speed the process.
At Kennedy, we’ve structured our operations and expert
staff to maximize efficiency without sacrificing quality
— all to the benefit of our clients."
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