Moody's Investors Service has upgraded the credit ratings of McGraw-Hill Education, Inc., elevating the company's corporate family rating (CFR) to B1 from B2 and changing the outlook to stable from positive. Alongside the CFR move, Moody's raised the ratings on McGraw Hill's senior secured notes and its senior secured first lien bank credit facility to Ba3 from B1, and lifted the senior unsecured notes rating to B3 from Caa1.
The agency attributed the upgrades to expectations that McGraw Hill's overall revenues and cash flows will expand in a low- to mid-single-digit percentage range over the coming two years. Moody's specifically linked this forecast to an anticipated acceleration in the K-12 adoption schedule, which is expected to include purchases of core Math or Reading curricula in the three largest adoption states.
Moody's noted that McGraw Hill has repaid $646 million of debt since its July 2025 initial public offering and projects the company will continue reducing indebtedness in line with a reported net leverage target of 2x to 2.5x.
The agency's assignment of a B1 CFR reflects a balance of considerations: a moderately high financial leverage profile, the seasonal nature of cash flow, and strong competitive pressures in the education publishing market. Within the company's large K-12 segment, Moody's highlighted that annual revenue volatility is driven by the purchasing cycles tied to adoption states. For higher education, the ratings commentary pointed to constrained earnings growth due to affordability-driven price pressure, competition from open educational resources, and the cyclicality associated with enrollment trends.
Financial metrics cited by Moody's show improvement in leverage, with reported leverage declining to 4.3x as of March 2026 from 5.1x pre-IPO, an improvement Moody's attributes primarily to debt repayments executed since the IPO.
On expected demand, Moody's indicated the K-12 segment should see revenue and profit gains from the projected uptick in adoption schedules across each of the next two years, noting that the anticipated purchases will include Math or Reading materials in California, Florida, and Texas.
Liquidity outlooks were described as very good for the next 12 to 18 months. Moody's cited a cash balance of $254 million as of March 2026, an expectation of more than $200 million of free cash flow in fiscal 2027, and access to an undrawn $300 million asset-based lending revolver that matures in August 2029 as supporting liquidity factors.
Finally, Moody's reiterated that McGraw Hill remains majority controlled by private equity sponsor Platinum Equity, which holds 87% of the voting control.
Clear summary
Moody's upgraded McGraw Hill's CFR to B1 and raised several debt instrument ratings, citing improving leverage after $646 million of post-IPO debt repayment and expected low- to mid-single-digit revenue and cash-flow growth tied to K-12 curriculum adoptions in major states. Liquidity is viewed as very good over the near term, supported by cash on hand, expected free cash flow, and an undrawn revolver.
- Ratings action: CFR to B1 from B2; secured notes and first-lien facility to Ba3 from B1; senior unsecured notes to B3 from Caa1.
- Debt reduction: $646 million repaid since July 2025 IPO; leverage improved to 4.3x as of March 2026 from 5.1x pre-IPO.
- Near-term liquidity: $254 million cash as of March 2026; >$200 million expected free cash flow in fiscal 2027; undrawn $300 million ABL revolver due August 2029.
Key points
- Moody's expects low- to mid-single-digit revenue and cash-flow growth over the next two years tied to increased K-12 adoption activity, including core Math or Reading purchases in California, Florida, and Texas.
- The ratings upgrade follows $646 million of debt paydown since the July 2025 IPO and a reduction in reported leverage to 4.3x as of March 2026.
- McGraw Hill's liquidity position is supported by cash on the balance sheet, forecasted free cash flow in fiscal 2027, and access to an undrawn $300 million revolver maturing in August 2029.
Risks and uncertainties
- Seasonality and adoption-cycle volatility in the K-12 market may cause significant annual swings in revenue for the education publishing sector.
- Competitive pressures and affordability-driven price compression in higher education, including competition from open educational resources, could constrain earnings growth for higher education publishers.
- McGraw Hill's moderately high financial leverage remains a credit consideration despite recent paydowns, and achieving the targeted net leverage range will depend on continued debt reduction and cash-flow performance.