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Moody's rates Riverdeep loans Ba3, cuts Houghton Mifflin note to Ba3
Moody's Investors Service said it assigned B3 corporate family and probability-of-default ratings to Riverdeep Interactive Learning USA, Inc. and Ba3 ratings with loss-given-default assessments of LGD2 (21%) to its proposed $250 million first-lien senior secured revolving credit facility due 2012 and $1.57 billion first-lien senior secured term loan B due 2013.
The agency also downgraded Houghton Mifflin Co.'s $142 million 7.2% senior secured notes due 2011 to Ba3 (LGD2, 21%) from Ba2 (LGD1, 6%) and confirmed the remaining ratings of Houghton Mifflin, HM Publishing Corp., Houghton Mifflin LLC, Riverdeep Interactive Learning Ltd. and Riverdeep Group Ltd.
The outlook is stable. This concludes the reviews of Riverdeep and Houghton Mifflin that began on Nov. 29 following HM Rivergroup plc's announcement that it signed a definitive agreement to acquire Houghton Mifflin Holding Co. Inc.
The agency said the ratings reflect the heavy debt burden and high leverage expected following the merger, the integration risk presented by Rivergroup's acquisition of a company close to ten times its size, the high degree of competition encountered from larger and higher-rated rivals in the U.S. basal publishing market and uncertainties concerning Riverdeep's ability to increase publishing and software sales and effect synergies.
Ratings are supported by the merged company's ability to cross-sell a broader range of print and digital basal and supplemental educational products and to capitalize upon a relatively strong 2007-2010 state adoption calendar, Moody's said.
At closing, Rivergroup expects to record debt of $3.7 billion and a debt-to-EBITDA ratio of 11.6x.
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