Moody's downgrades Adtalem

Moody's Investors Service said it downgraded Adtalem Global Education Inc.'s corporate family rating to B1 from Ba3 and confirmed its B1-PD probability of default rating.

The agency affirmed the company's senior secured first-lien credit facility, which includes an $850 million term loan facility due 2028 and a $400 million revolving credit facility expiring in 2026, at B1 and its $800 million senior secured notes due 2028 at B1. The speculative grade liquidity rating was maintained at SGL-1.

Moody’s also revised the outlook to stable from under review. This action concludes the ratings review started on Sept. 14.

“The downgrade of the CFR reflects the substantial increase in Adtalem's financial leverage with pro forma debt to EBITDA increasing to about 4x (excluding $60 million of run rate cost synergies) from about 1.6x (excluding balance sheet debt associated with the acquisition) for LTM March 31, 2021, following the company's debt-funded acquisition of Walden University (Walden). Moody's also recognizes the heightened integration and execution risks given the large scale of Walden. There are inherent risks with the integration of such a large acquisition, including the potential for temporary organizational or operational inefficiencies, which could lead to higher costs or negatively impact enrollments,” the agency said in a press release.

The new outlook reflects expectations that Adtalem will continue growing its revenue, generating free cash flow to debt at least in the high single-digit percentage range, and successfully integrate Walden into its operations, Moody’s said.

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