S&P changes Cengage view to negative

S&P said it revised its outlook on Cengage Learning Holdings II Inc. to negative from stable and affirmed its B- issuer credit rating.

At the same time, the agency affirmed the B+ issue-level rating on the company's $250 million asset-based loan revolving credit facility due 2021. The 1 recovery rating reflects an expectation for very high recovery (90%-100%; rounded estimate: 95%) of principal in the event of a payment default.

S&P also affirmed the B issue-level rating on Cengage's first-lien term loan due 2023. The recovery rating remains 2, indicating an expectation for substantial recovery (70%-90%; rounded estimate: 70%) of principal in the event of default.

In addition, the company affirmed the CCC issue-level rating on the company's senior unsecured notes due 2024. The recovery rating remains 6, indicating an expectation for negligible recovery (0%-10%; rounded estimate: 5%) of principal in the event of a payment default.

“The negative outlook reflects our expectation that Cengage will generate around $5 million of reported FOCF in fiscal 2019, substantially lower than our previous forecast of close to $90 million because of higher operating costs and capital spending,” the agency said in a news release.

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