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California Association of Private Postsecondary Schools

TEXT-S&P says rough year for the U.S. for-profit education industry

08/22/2012

REUTERS - August 21, 2012

The U.S. for-profit education industry has been struggling for the past year because of regulatory changes, broad economic uncertainty, increased competition from online education, and significant bad press, said an article published today by Standard & Poor's Ratings Services. The industry's fixed costs are high, so revenue and EBITDA have declined substantially as a result. "These factors have led to downgrades or negative outlook revisions for all of the for-profit education companies we rate over the past 12 months," said Standard & Poor's credit analyst Chris Valentine. In the article, titled "Credit FAQ: The U.S. For-Profit Education Industry Is Put To The Test," we answer questions about the credit quality of the industry and where we see it going. Also, see the related CreditMatters TV segment, titled "Regulation And Economic Uncertainty Spark Revenue Declines In The U.S. For-Profit Education Sector," dated Aug. 20, 2012. We have negative rating outlooks on two companies, Education Management LLC (BB-/Negative/--) and Kaplan Learning Co. (a division of Washington Post Co., BBB+/Negative/A-2). We also follow Laureate Education Inc. (B/Stable/--), which has grown over the most recent quarters because of its international diversification. "Over the next 12 months, if current trends persist, we could see additional negative rating actions," said Mr. Valentine.