Moody's rates Education Management SLG-2

Moody's Investors Service said it assigned an SGL-2 speculative grade liquidity rating to Education Management LLC and moved the B2 corporate family and probability-of-default ratings to the company from Education Management Corp. in conjunction with the proposed refinancing of Education Management's senior secured credit facilities.

The agency also affirmed the company's $300 million senior secured revolver due 2012, amended $1.182 billion senior secured term loan B due 2013 and $375 million 8¾% senior unsecured notes due 2014 at B2 (LGD3, 44%) and its $385 million 10¼% senior subordinated notes due 2016 at Caa1 (LGD6, 92%).

The outlook is stable.

The B2 corporate family rating acknowledges Education Management's prominent market position in the for-profit, post-secondary education space and generally favorable fundamentals for the industry in terms of expected growth in enrollment over the medium term, potential for inroads into a greater portion of the market for post-secondary education and above-inflation trends with respect to tuition increases, the agency said.

The ratings are constrained by the company's high level of overall debt and the low level of pro forma free cash flow, defined as cash from operations less capital expenditures less dividends, relative to debt, Moody's said.

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