Moody's upgrades Cambium

Moody's Investors Service said it raised Cambium Learning, Inc.'s corporate family and probability-of-default ratings to B3 from Caa2 and its $30 million senior secured revolving credit facility due 2013 and $98 million senior secured term loan due 2013 to B1 (LGD3, 33%) from Caa1 (LGD3, 34%).

This concludes the review for possible upgrade begun on Dec. 17, and the outlook is positive.

Cambium completed its equity-financed merger with Voyager Learning Co. on Dec. 8. Moody's said it views this merger favorably because it has broadened the combined entity's geographic footprint and product portfolio with only modest customer and product overlap, no additional debt was added to the capital structure and pro forma revenue, without taking into account purchase accounting, is approximately twice as large. As a result of Voyager's incremental EBITDA, financial leverage has been materially reduced, and Moody's expects total leverage to be maintained below 4 times in 2010.

The agency said the positive outlook reflects the potential for revenue growth and margin expansion if cross-selling opportunities and synergies are successfully realized.

The ratings are constrained by the company's small revenue base, the integration risks inherent in the transaction and Cambium's reliance on federal and state funding of its education programs, Moody's said.

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