Moody's upgrades Cengage

Moody's Investors Service said it upgraded Cengage Learning, Inc.'s corporate family rating to B2 from B3 and affirmed the B2 senior secured term loan rating.

On Monday, Cengage reported it agreed to sell about $500 million in a new series of convertible preferred shares to Apollo Global Management, Inc.

Cengage plans to use the proceeds and cash on hand to redeem, repurchase and/or refinance all its outstanding senior unsecured notes due 2024 and to pay fees and expenses incurred in connection with the transaction. The transaction is expected to close by June 30, subject to customary closing conditions.

“The upgrade of the CFR reflects a material reduction in outstanding debt following the proposed transaction and Moody's expectation that Cengage management will remain committed to further deleveraging over the next two to three years. Governance considerations are key factors in today's upgrade rating actions. Moody's projects that the company's Debt/EBITDA (Moody's adjusted) will decline to around 4.8x by FYE 3/2024 and 4.2x by FYE 3/2025,” the agency said in a press release.

The outlook remains stable.

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