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Announcement:

Moody's reviews Washington Post's A1, Prime-1 ratings for possible downgrade

Global Credit Research - 17 Aug 2010

Approximately $400 million of debt affected

New York, August 17, 2010 -- Moody's Investors Service placed The Washington Post Company's (WPO) A1 senior unsecured and Prime-1 commercial paper ratings on review for possible downgrade. The review is prompted by the potential that proposed Department of Education (DOE) guidelines regarding access to Title IV student loans for private for-profit educational institutions could negatively affect the profitability of Kaplan, which is WPO's largest operating segment.

On Review for Possible Downgrade:

..Issuer: Washington Post Company (The)

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently A1

....Commercial Paper, Placed on Review for Possible Downgrade, currently P-1

Outlook Actions:

..Issuer: Washington Post Company (The)

....Outlook, Changed To Rating Under Review From Negative

In the review, Moody's will evaluate the direct and indirect effects on Kaplan of DOE guidelines that would impose minimum student repayment and maximum debt-to-income requirements on educational programs in order for their students to remain eligible for Title IV loans. The DOE has publicly disclosed information on repayment rates that suggest some of Kaplan's institutions do not meet the proposed guidelines, but significant uncertainties exist regarding performance relative to the proposed standards. Moody's will consider Kaplan's level of compliance with the Title IV loan eligibility requirements, the phase-in period during which educational institutions would have to meet any proposed standards, and the actions Kaplan plans to implement should some of its programs require remediation to meet the standards. Moody's will also review the potential for changes in the level of student demand for Kaplan's services including the effect on Kaplan's pricing power, and the operating costs necessary to attract, retain and educate students.

The high degree of uncertainty regarding the ultimate outcome on Kaplan and WPO is the primary factor prompting the review of the Prime-1 rating. Kaplan's higher education (KHE) division derives approximately 80% of its receipts from Title IV programs and Moody's estimates KHE generated approximately 38% of WPO's revenue and a higher percentage of EBITDA for the 12 months ended 6/30/10.

The request for comment period for the proposed DOE rules ends on September 9, 2010. Although there is a reasonable likelihood the DOE will issue definitive rules by early November in order for the rules to be effective for the 2011-2012 academic year, the timing of any final rulemaking is uncertain. Moody's will monitor developments and consider any final rules adopted by the DOE including the repayment rate and debt-to-income standards to be utilized as well as the implementation period and any interim ramifications on Kaplan's student access to title IV loans.

WPO has a conservative balance sheet with 1.5x gross debt-to-EBITDA (LTM 6/30/10 incorporating Moody's standard adjustments and the proposed sale of Newsweek), more cash than GAAP reported debt ($659 million vs. $403 million as of 6/30/10), and sizable free cash flow (29% of debt LTM 6/30/10 incorporating Moody's standard adjustments). Moody's is concerned that pressure on Kaplan's earnings could increase leverage over the intermediate term. In addition, as part of the review, Moody's will consider whether WPO will seek to more aggressively repurchase shares in response to the recent drop in its stock price.

The last rating action on WPO was on January 27, 2009 when Moody's assigned an A1 rating to the company's $400 million senior unsecured notes due 2019 and retained the negative rating outlook.

Please see the credit opinion on www.moodys.com for additional information on WPO's ratings.

For the assignment of WPO's ratings, Moody's has used its methodology for the Large Global Diversified Media Industry, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating WPO can also be found in the Rating Methodologies sub-directory on Moody's website.

WPO is a diversified education and media company whose operations consist of: Kaplan education (62% of revenue), which consists of higher education, test prep and professional training businesses; newspaper publishing (15%) led by The Washington Post; television broadcasting (7%) comprised of five network affiliated stations and one unaffiliated station; and cable television (16%) through its Cable One franchise with approximately 650,000 basic subscribers in largely Midwestern, Southern and Western states. Consolidated revenue was approximately $4.6 billion for the LTM ended 6/30/10.

New York
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's reviews Washington Post's A1, Prime-1 ratings for possible downgrade
No Related Data.
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