New York, January 07, 2015 -- Moody's Investors Service, ("Moody's") changed Education Management LLC's ("Education Management") Probability of Default Rating ("PDR") to D-PD from Caa3-PD. The rating action was taken to reflect the company's recent debt-for-equity exchange of the majority its debt. On January 5, 2015, Education Management announced that it has closed on a restructuring transaction, whereby company's rated $1.3 billion of senior secured credit facilities, comprising approximately $220 million outstanding on its revolver and $1.09 billion of term loans, have been exchanged for two first lien term loans totaling $400 million due 2020 and for a combination of preferred equity and warrants for common stock. Most of the remaining balance of the company's existing debt, $217 million of senior cash pay/PIK notes due 2018 (not rated by Moody's), has been exchanged for preferred equity. Moody's views these transactions as a distressed exchange. The PDR of D-PD signifies that the distressed exchange qualifies as a default under Moody's definition of default, which is intended to capture events whereby issuers fail to meet debt service obligations outlined in their original debt agreements. Moody's does not currently rate the debt in the company's new capital structure.
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