Fitch: McGraw-Hill loan BB

Fitch Ratings said it assigned an initial issuer default rating of B+ to McGraw-Hill Global Education Holding LLC and McGraw-Hill Global Education Finance, Inc.

Fitch also said it assigned a BB with a recovery rating of RR2 to the proposed senior secured credit facility, which includes a term loan and a revolver.

The outlook is stable.

Apollo Group will be acquiring the McGraw-Hill Education unit for $2.4 billion. Apollo intends to finance the acquisition with $1.05 billion of senior secured notes, $560 million in senior secured term loans, a $240 million revolver and $950 million in cash from Apollo.

The credit facility and the notes will be pari passu with one another and benefit from a first-priority lien on all material assets, the agency said.

Both the bank facility and the notes will be guaranteed by existing and future wholly-owned domestic subsidiaries, Fitch said.

The ratings reflect the strong free cash flow metrics of McGraw-Hill, the agency said.

The ratings also consider an expectation that free cash flow will be dedicated toward debt reduction and acquisitions, Fitch said.

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