March 14 - Standard & Poor's Ratings Services said today that it assigned Pittsburgh-based Education Management LLC's new $350 million term loan due 2018 its 'BB' issue-level rating (one notch higher than the 'BB-' corporate credit rating on the company). The recovery rating on this debt is '2', indicating our expectation of substantial (70% to 90%) recovery for lenders in the event of a payment default. The 'BB-' corporate credit rating on the company, along with the negative rating outlook, remains unchanged. The 'BB-' rating reflects Education Management's dependence on federal student loan programs and the limitations set by the Department of Education's (DoE) regulations on gainful employment and federal student loan eligibility. We expect the company's revenue and EBITDA trends to remain under pressure in 2012 and potentially beyond, as the company implements further initiatives to reduce student loan default rates and revises its business practices to comply with new regulations. We view Education Management's business risk profile as "weak" (based on our criteria) because the regulatory risk outweighs its good market position and business fundamentals. We continue to assess the company's financial risk profile as "aggressive" (based on our criteria) as a result of the high debt balances it incurred in its 2006 LBO. For 2012, under our base-case scenario, we expect leverage to be in the mid-4x area, broadly in line with the financial risk indicative ratio range of 4x-5x that we associate with an aggressive profile under our criteria. Education Management is one of the leading for-profit post-secondary education providers, offering both traditional and online programs in career-oriented disciplines. The company directly or indirectly derived 90.3% of its fiscal 2011 net revenue from federal government-sponsored financial aid (compared with 88.5% in fiscal 2010) that its students receive. We consider this high exposure to federal student lending as a long-term risk for the company, because any legislative or regulatory action that results in a substantial reduction in funding would significantly hurt its profits. RELATED CRITERIA AND RESEARCH -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 -- Use Of CreditWatch And Outlooks, Sept. 14, 2009 -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009 -- Standard & Poor's Revises Its Approach To Rating Speculative-Grade Credits, May 13, 2008 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 RATINGS LIST Education Management LLC Corporate Credit Rating BB-/Negative/-- New Ratings Education Management LLC $350 mil term loan due 2018 BB Recovery Rating 2 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.