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S&P rates Knowledge Learning loan BB-, notes B-
Standard & Poor's said it affirmed its B+ corporate credit rating on Knowledge Learning Corp. At the same time, S&P assigned its BB- senior secured debt rating to the company's proposed $100 million senior secured revolving credit facility due in 2010 and to its $540 million senior secured term loan due in 2012.
S&P also assigned its B- subordinated debt rating to Knowledge Learning's $251 million senior subordinated notes due in 2015.
The existing ratings were taken off CreditWatch, where they were placed with negative implications on Nov. 8. The outlook is now negative.
The company is expected to use the proceeds from the term loan and subordinated notes, in addition to $200 million of new common equity contributed by Knowledge Learning's principal investors, to purchase KinderCare Learning Centers Inc. KinderCare's ratings also were affirmed and removed from CreditWatch.
S&P said the low speculative-grade rating reflects the heavy debt burden assumed by Knowledge Learning and the company's weakened financial profile. In addition, Knowledge Learning will triple in size, and despite the company's track record of successfully integrating acquisitions, a transaction of this scale will likely present integration challenges. The ratings also reflect the company's narrow operating focus in the child-care services sector and the difficult operating environment in this field.
These concerns are only partially offset by the company's strong liquidity for its ratings category, its leading position in a highly fragmented industry, and its diversification across 2,038 facilities in 39 states in the United States, the agency said.
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