Fitch reviews McGraw-Hill, rates notes B-/RR6

Fitch Ratings said it placed the B+ issuer default ratings assigned to McGraw-Hill Global Education Holdings, LLC (MHGE), McGraw-Hill Global Education Finance, Inc. (MHGE Finance), MHGE Parent, LLC (HoldCo) and MHGE Parent Finance, Inc. (HoldCo Finance) on Rating Watch Positive.

The agency also assigned an expected rating of B-/RR6 to the proposed senior unsecured notes to be issued by MHGE and MHGE Finance.

MHGE, MHGE Finance, HoldCo and HoldCo Finance are indirect wholly owned subsidiaries of McGraw-Hill Education, Inc. (MHE).

Fitch said the actions follow MHGE's announcement that it will be undertaking a recapitalization that will reduce debt, improve liquidity, diversify the company's operating and financial profile and strengthen the credit facilities' security package.

The recapitalization is expected to be funded with a mix of cash on hand along with proceeds from the issuance of new senior secured and senior unsecured debt and MHE's previously announced IPO.

The agency said it would consider an upgrade if IPO proceeds are used to repay all existing HoldCo debt, which should result in Fitch-calculated FFO adjusted total leverage declining below 4.5 times.

The recapitalization details include the expectation that MHE will use a portion of net proceeds from its IPO, announced in September 2015, to repay the $500 million of senior unsecured notes issued by HoldCo and HoldCo Finance. Pro forma for the IPO, FFO adjusted total leverage is expected to be 4.4 times as of Dec. 31, 2015.

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