Washington Post Company facing credit downgrade


As challenged as the newspaper business is these days, that’s not why Moody’s Investors Service has put the Washington Post Company’s credit ratings under review for possible downgrade. The Kaplan educational division, now the largest part of the company, is the unit that has Moody’s analysts concerned.

Kaplan and other for-profit colleges and universities have been under fire from regulators for their drop-out rates and high student loan defaults. That’s put downward pressure on enrollments and revenues.

“In the review, Moody’s will evaluate the competitive and regulatory environment in which Kaplan (WPO’s largest operating segment) is operating, and the timing and levels at which Kaplan’s enrollment levels and revenue could potentially stabilize and return to growth. Moody’s
will focus on the effects of increased student selectivity, the degree of competition for and cost to acquire students that have a higher probability of successfully completing degree programs and obtaining employment, and Kaplan’s ongoing efforts to lower the risk of its students’ loan defaults. The varying strategies implemented by schools to adapt to the Department of Education’s (DOE) new ‘Gainful Employment’ regulations and the effect on the competitive landscape will also be a focus. Moody’s will consider the ramifications of the projected economic environment on student demand for post secondary education and the availability of both public and private student loan funding. In addition, Moody’s will evaluate Kaplan’s plans to adjust its cost structure to align with lower levels of enrollment and revenue,” the ratings agency said.

On Review for Possible Downgrade:

..Issuer: Washington Post Company (The)

…. Commercial Paper, Placed on Review for Possible Downgrade, currently P-1

….Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently A2

Outlook Actions:

..Issuer: Washington Post Company (The)

….Outlook, Changed To Rating Under Review From Negative

RBR-TVBR observation: The Washington Post Company, it should be noted, still has an investment grade rating, which would be envied by most media companies. In fact, it could drop as much as much as four notches (not likely) and still not be into junk bond territory.