S&P drops Education Management

Standard & Poor's said it lowered its corporate credit rating on Education Management LLC to B from BB-. The outlook is negative.

At the same time, the agency said it revised its recovery rating on the company's senior secured credit facilities to 3, reflecting an expectation for meaningful recovery for lenders in the event of default, from 2. S&P said it also lowered the issue-level rating on this debt to B, from BB, in accordance with its notching criteria for a 3 recovery rating.

Additionally, the agency said it lowered the issue-level rating on the company's senior unsecured and subordinated notes to CCC+ from B, in conjunction with the corporate credit rating change. The recovery rating on this debt remains at 6.

"The downgrade reflects our expectation that tough economic conditions and new business practices mandated by tighter regulation will cause ongoing enrollment declines over the near term," said S&P credit analyst Chris Valentine in a news release.

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