Moody's Downgrades Scholastic Ratings

NEW YORK (AP) — Moody's Investors Service said Thursday that it downgraded Scholastic Corp.'s corporate family rating and probability of default rating to "Ba2" from "Ba1," saying it expects the book publisher will have a hard time significantly improving its operating margin in the next year to 18 months.

In a statement, Moody's predicted that some sales pressure stemming from weaker consumer spending will make it more difficult for Scholastic to raise its operating margin over the period, even though the company is working to lower its high fixed cost structure and weed out underperforming parts of the business.

Moody's also lowered its rating on the company's 5 percent senior unsecured notes due in 2013 to "B1" from "Ba2."

Moody's said that the changes complete a review for possible downgrade it began on Dec. 19. Its rating outlook is "stable."

Shares of Scholastic, which said Thursday that its fiscal third-quarter loss narrowed, rose $2.76, or 21.1 percent, to close at $15.85.