Publishing company McGraw-Hill Education has issued a $400 million senior secured PIK toggle note.
Credit Suisse, BMO, Jefferies, Morgan Stanley, Nomura and UBS are syndicating the high yield bond, Forbes reported.
The holding company (holdco) notes, which have been issued by the parent company of McGraw-Hill Global Education, are rated Caa1 by Moody’s and B- by Fitch and are due to mature in 2019.
Moody’s upgraded existing debt instruments on issuer McGraw-Hill Global Education Holdings as a result of the cushion provided by the new notes.
Proceeds will be used to fund a $388 million dividend to shareholders after the company was bought out by Apollo Global Management for $2.4 billion 15 months ago.
In March 2013, sponsor Apollo paid $1 billion in cash for the New York-headquartered McGraw-Hill, one of the top three providers of higher education materials in the US.
McGraw-Hill issued $800 million of secured notes due 2021 in March 2013 to fund the acquisition. Those notes now trade at 114.50 yielding 4.95 percent, Forbes reported.
Financing also included a $240 million, five-year revolving cash flow facility and a $686 million first lien senior secured term loan due 2019.
A similar $445 million dividend paid in December 2013 by sister company, McGraw-Hill School Education (MHSE), reduces the overall equity outlay by Apollo to approximately 6 percent, Fitch said.
The new notes are non-callable for one year, with a first call at 102, then 101, then par, Forbes reported. They also feature an equity clawback at 100 percent in the first year at 102 and in the second year at 101.