Moody’s might lower Pearson

Moody's Investors Service said it placed Pearson plc's Baa1 long-term issuer rating and the Baa1 guaranteed senior unsecured ratings of the company and its rated subsidiaries on review for downgrade.

The guaranteed short-term rating of Pearson Holdings Inc. was affirmed at Prime-2.

Moody's action follows the company's announcement that 2015 operating profits are likely to be at the low end of the company's October guidance and that further profit deterioration in 2016 is likely to be significant on the back of substantive restructuring charges and continuing difficult market conditions in U.S. higher education market and other lines of business.

"Our decision to review Pearson's Baa1 ratings for downgrade reflects the prolonged weakness in its operating performance as a result of challenging conditions in several of its key education markets," Gunjan Dixit, Moody's vice president and lead analyst for Pearson, said in a news release.

"Pearson has generated significant proceeds from asset sales, which have helped to support the company's credit profile. Yet with ongoing weak operating performance, Pearson will likely rely on a portion of these disposal proceeds to fund the restructuring and the dividends, which could increase the company's net debt position in 2016."

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