Moody’s assigns ratings to Laureate Education; outlook stable

Rating Action:

Moody’s assigns ratings to Laureate Education; outlook stable

Global Credit Research – 18 Jun 2007

Approximately $2.2 billion of debt affected

New York, June 18, 2007 — Moody’s Investors Service assigned B1 ratings to the proposed senior secured credit facilities of Laureate Education, Inc. (“Laureate”). Concurrently, Moody’s assigned a B2 Corporate Family Rating to Laureate. Moody’s also assigned B3 and Caa1 ratings to Laureate’s proposed senior unsecured and senior subordinated notes, respectively. The outlook for the ratings is stable.

The transaction is in connection with the proposed all cash acquisition of Laureate by an investor group which includes Kohlberg Kravis Roberts & Co., S.A.C. Capital Management, LLC, Moore Capital Management, LLC, Citi Private Equity, Makena Capital Management LLC, Torreal Sociedad de Capital Riesgo de Regimen Simplificado S.A., SPG Partners, LLC, Vulcan Capital Education Holdings LLC, Brenthurst Funds, Sterling Partners and its founding members, Demeter Holdings Corporation, Stockwell Fund, L.P., and Morgan Creek Partners II, LP, as well as Bregal Europe Co-Investment L.P., Caisse de depôt et placement du Quebec and Citigroup Global Markets. The sponsors commenced a cash tender offer to purchase all of the company’s outstanding shares of common stock on June 8, 2007. The proposed transaction values the company at about $3.82 billion or just over 15 times twelve month adjusted EBITDA to March 31, 2007.

Proceeds from the proposed $695 million term loan B, the $685 million senior unsecured notes and the $310 senior subordinated notes, along with about $2.2 billion in equity and available cash will be used to purchase 100% of the equity of Laureate, partially refinance existing debt and pay fees and expenses associated with the deal. The senior secured credit facilities include a $100 million delayed draw term loan which will be available for two years after closing. The $400 million revolver includes a sub-facility for letters of credit. The revolver is not expected to be drawn at closing. The senior secured credit facilities also provide for a $300 million accordion feature (not rated).

The ratings are constrained by the high level of overall indebtedness and expectations of negative free cash flow generation (defined as cash from operations less capital expenditures) in the medium term, which leaves little room for execution missteps. Nonetheless, the Corporate Family Rating of B2 acknowledges Laureate’s prominent market position in the international for-profit, post-secondary education space, the strength of its brands in attractive, growing economies and favorable fundamentals for the industry in terms of expected growth in enrollment. The ratings also recognize adequate initial liquidity based primarily on revolver availability, including the benefits of electing to pay interest on up to $425 million of senior unsecured notes in-kind and the flexibility afforded the company from the absence of financial covenants in the senior secured credit facilities. The ratings are also supported by the company’s successful record in entering and expanding markets over long periods of time and seasoned management with continuing significant equity exposure in the company.

Moody’s assigned the following ratings:

B2 Corporate Family Rating;

B2 Probability of Default Rating;

B1 (LGD3, 33%) rated $400 million senior secured revolving credit facility due 2014;

B1 (LGD3, 33%) rated $695 million senior secured term loan B due 2014;

B1 (LGD3, 33%) rated $100 million delayed draw term loan due 2014;

B3 (LGD5, 77%) rated $685 million senior unsecured notes due 2015;

Caa1 (LGD6, 93%) rated $310 million senior subordinated notes due 2016;

The ratings outlook is stable.

The transaction is expected to be completed in the third quarter of 2007. The ratings are contingent upon the receipt of executed documentation in form and substance acceptable to Moody’s.

For further detail, refer to Moody’s credit opinion for Laureate Education, Inc.

Laureate Education, Inc. is based in Baltimore, Maryland, and is the parent company of Laureate International Universities, one of the world’s largest private networks of accredited campus-based and online universities with 26 institutions in 16 countries, offering academic programs to about 263,000 students through 68 campuses and online delivery. Laureate offers a broad range of career-oriented undergraduate and graduate programs through campus-based universities located in Latin America, Europe, and Asia. Through online universities, Laureate offers the growing population of non-traditional, working-adult students the convenience and flexibility of distance learning to pursue undergraduate, master’s and doctorate degree programs in major career fields including engineering, education, business, and healthcare. Laureate had revenues of approximately $1.2 billion for the twelve months ended March 31, 2007.

New York
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody’s Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Costas Chrysostomou
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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