S&P: KinderCare view still negative

Standard & Poor's said that the ratings on KinderCare Learning Centers Inc. remain on CreditWatch with negative implications. This includes the company's B+ corporate credit rating, its B+ senior secured rating, and its B- subordinated debt rating.

The CreditWatch listing reflects the announced merger agreement between KinderCare and Knowledge Learning Corp (B+/Watch negative/--) in a cash-financed transaction of more than $1 billion (including the assumption of debt).

The combination of the two companies will create the largest for-profit U.S. operator of early childhood education centers with about 1,980 centers, revenues of about $1.4 billion, and EBITDA of roughly $200 million. However, S&P said it expects that the acquisition would significantly increase lease-adjusted debt leverage at a time when the industry has been experiencing soft demand. In addition, Knowledge Learning Corp., which more than doubled its size a year ago to 750 centers through the acquisition of Aramark Educational Resources, will be challenged to integrate such a sizable acquisition into its existing network.

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