McGraw-Hill Education Sells $800 Million of Debt for Apollo Deal

McGraw-Hill Education, the digital learning company being acquired by Apollo Global Management LLC, issued $800 million of eight-year, senior secured notes after reducing the size of its sale from an initial $1.05 billion.

The company’s 9.75 percent notes yield 846 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. Moody’s Investors Service rates the notes B2.

The company marketed $1.05 billion of notes last week and reduced the sale to $1 billion yesterday before selling the bonds today, according to a person familiar with the transaction. A call to Brian Belardi, a spokesman for McGraw-Hill Education, was not returned.

Proceeds from the sale will fund the private-equity firm’s purchase of the unit from McGraw-Hill Cos., said the person, who asked not to be identified citing lack of authorization to speak publicly.

Chief Executive Officer Harold “Terry” McGraw III decided to sell the education division, which his great-grandfather started 125 years ago, after pressure from Jana Partners LLC, a New York-based hedge fund, and the Ontario Teachers’ Pension Plan.

McGraw-Hill Education increased the size of its term loan by $50 million to $610 million yesterday, according to a person familiar with that transaction, who asked not to be identified because the information is private. Apollo is seeking a $240 million revolving line of credit, Bloomberg data show. The New York-based company is contributing $950 million of equity to fund the $2.4 billion acquisition, Moody’s said in a March 5 statement.

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