CNGO 9.5 06/15/24

Cengage Learning Inc

TMT, Credit


Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), Pearson PLC (PSON LN)

Highlights

The presenter is long Cengage’s senior unsecured bonds (CNGO 9.5, 15 June 2024), which are currently trading in the high 80s (YTW of ~11.8%). The company competes with private equity-backed McGraw-Hill Education and Pearson Education, but it is the only pure play higher education publishing company (over 80% of EBITDA is derived from the sale of higher education courseware). The company is transitioning the business from print-only to a digital+print format; and, despite a handful of challenges [rental, channel destocking, slightly negative college enrollment trends, piracy, and the Street’s belief that “print is dead” (a point with which the presenter objects)], the cycle of new editions should provide some uplift to numbers and the company will continue to generate healthy FCF. In addition, there is the potential for capital to be deployed in the direction of debt retirement, making the risk/ reward profile of the unsecured debt attractive.

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Idea Discussion

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