Moody's: Educate to negative

Moody's Investors Service affirmed Educate, Inc.'s B3 corporate family rating and probability of default rating and affirmed the B3 rating on the $74 million second-lien term loan due 2014.

The outlook was revised to negative from stable.

Moody's said the B3 corporate family rating reflects Educate's small scale, the challenging operating environment, soft revenue trends, and the competitiveness of the pre-kindergarten through 12th-grade tutoring business, both from corporate providers and individual teachers. The rating is supported by credit metrics that are good for the ratings category, the company's repositioning as a franchise model, substantial brand value, as well as high operating margins and low maintenance capital expenditures, according to the news release.

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