Fitch cuts MGHE debt, rates notes B

Fitch Ratings said it affirmed the long-term issuer default rating of McGraw-Hill Global Education Holdings, LLC (MHGE), McGraw-Hill Global Education Finance, Inc. (MHGE Finance), MHGE Parent, LLC (MHGE Parent) and MHGE Parent Finance, Inc. (MHGE Parent Finance) at B+.

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

The agency also assigned a B/RR5 rating to MHGE Parent's and MHGE Parent Finance's proposed issuance of senior unsecured notes due 2022.

The outlook is stable.

In addition, Fitch downgraded MHGE Parent's and MHGE Parent Finance's senior unsecured rating to B/RR5 from B+/RR4 due to the reduced recovery prospects estimated by Fitch for the unsecured holding company notes under the proposed capital structure.

“We note that the company's proposed recapitalization, combined with MHGE HoldCo Note repurchases completed during fiscal year (FY) 2017, will reduce MHE's total outstanding debt by approximately $100 million,” the agency said in a news release.

“However, while the recapitalization decreases debt at MHGE Parent by an additional $194 million from the $444 million outstanding as of Nov. 1, 2017, the resultant increase in senior secured debt reduces Fitch's estimated recovery value available for the new MHGE HoldCo notes, thereby driving the downgrade.”

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