S&P turns McGraw-Hill view to positive

S&P said it changed its outlook for McGraw-Hill Education Inc. to positive from stable and affirmed the B- issuer rating. The issue-level and recovery ratings are unchanged.

“We expect MHE to further reduce debt, cutting leverage sustainably below 7x in the next two years. McGraw-Hill's leveraged buyout by private-equity firm Platinum in 2021 added roughly $1 billion of debt to its balance sheet, which raised leverage over 9x. However, strong EBITDA expansion coupled with debt repurchases of $100 million (face value) in fiscal 2023 improved adjusted leverage to 7.9x as of March 31, 2023, from 9.3x in March 2022.

“We believe the company will continue to prioritize debt reduction over the next 12 months, although MHE could still use excess cash for business investment, tuck-in acquisitions, and potential dividends,” the agency said in a press release.

S&P said there is a possibility of an upgrade if revenue and profitability stay broadly stable and the company further reduces debt over the next 12 months, maintaining leverage below 7x.

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