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S&P Lowers Education Management’s Rating on Enrollment Decline

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Feb. 24 (Bloomberg) -- Standard & Poor’s cut the credit rating of Education Management Corp., the education chain whose largest owner is Goldman Sachs Group Inc., by one level to CCC+ because of declining enrollment.

The credit rater lowered the Pittsburgh-based company’s rating from B- and said in a statement that it expects higher leverage as fewer students sign up to take classes. Education Management, founded in 1962, has reported two straight years of losses with revenue sinking to $2.5 billion in the year through June 30 from $2.76 billion in the previous 12 months, according to data compiled by Bloomberg. It has $1.28 billion of bonds and loans outstanding, the data show.

Regulators are probing the for-profit education industry, which has the highest student-loan default rates among educators at 13.6 percent, compared with the 9.6 percent and 5.2 percent rates at public and private universities, S&P said. The Education Department is rewriting eligibility rules for federal student loans and grants, which make up about 80 percent of Education Management’s funding, according to S&P.

The company’s $732.4 million term loan that expires in June 2016 was quoted today at 93.1 cents on the dollar to yield 7.62 percent, Bloomberg prices show.

Shares have dropped 78 percent since the end of 2011 to $6.27.

To contact the reporter on this story: Matt Robinson in New York at mrobinson55@bloomberg.net

To contact the editor responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net

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