TEXT-S&P may cut The Washington Post Co rating

Overview
-- Deteriorating operating performance at the Kaplan higher education and
newspaper divisions of U.S. media and education company Washington Post Co.
is hurting revenue and EBITDA, and we expect this to continue.
-- We have placed all long- and short-term ratings on Washington Post on
CreditWatch with negative implications.
-- The CreditWatch listing reflects our concern that weaker higher
education and newspaper segment operating performance trends will continue
over the near-to-intermediate term, prompting us to lower our assessment of
the company's business mix and earnings potential.
-- We believe the company faces significant execution risks in
stabilizing the higher education and newspaper businesses.

Rating Action
On Aug. 28, 2012, Standard & Poor's Ratings Services placed its 'BBB+'
long-term corporate credit and senior unsecured ratings, as well as its 'A-2'
short-term commercial paper (CP) rating, on Washington, D.C.-based Washington
Post Co. on CreditWatch with negative implications.

Total debt outstanding at June 30, 2012, was $456 million.

Rationale
The CreditWatch listing reflects our concern that operating performance and
discretionary cash flow will remain depressed as a result of more restrictive
regulation of for-profit education businesses, as well as our expectation that
continued sharp declines in newspaper advertising revenues will outweigh the
company's cost-reduction measures. While we do not anticipate significant
weakening of the company's modest leverage or "good" liquidity, we will
reassess the prospects for the education and newspaper businesses and the
level of support these units can provide the rating. We believe that the
company's mature cable and broadcasting businesses will continue to contribute
relatively stable operating performance, but only partially tempering the
unfavorable fundamentals of the education and newspaper businesses.

Consolidated revenues declined 5% in the three months ended June 30, 2012,
while EBITDA fell 16% largely as a result of a 14% decline in higher education
student enrollments. Newspaper segment losses increased due to an 8.7% decline
in advertising revenues, with a 15% decline in print ad revenues outweighing
an 8% increase in much smaller online sales. Gross lease-adjusted debt to
EBITDA increased to 1.9x for the 12 months ended June 30, 2012, from 1.3x over
the prior 12 months. Discretionary cash flow contracted sharply by 65% to $87
million in the 12 months ended June 30, 2012, versus the prior 12 months as a
result of the effect of weak education and newspaper segment operating
performance. In addition, the dividend, which consumes about 45% of operating
cash flow, was increased 4% for 2012 despite the reduction in profitability.

The company had cash balances of $264 million and marketable securities of
$424 million as of June 30, 2012. Cash and investment balances increased only
3% to $688 million as of June 30, 2012 as depressed operating cash flow and
proceeds from the sale of two small education businesses were offset by share
repurchases and investments in marketable securities. We believe the company's
marketable securities investments are nonstrategic and consider them a
potential source of liquidity, subject to taxable gains.

Washington Post had full availability of its $450 million revolving credit
facilities due June 2015, while its Australian dollar (A$) 50 million facility
due June 2015, which it used to hedge Australian operations, was fully drawn.
The U.S. revolving credit provides back-up to the company's CP program.
Long-term public debt maturities are minimal until 2019, when the company's
$400 million 7.25% senior notes mature.

CreditWatch
The CreditWatch resolution will focus the possible long-term business impact
of re-regulation on enrollment and cash flow in the company's higher education
division, together with unfavorable structural trends in newspaper publishing
and slower growth in cable TV that would otherwise help compensate. We will
also reassess the company's dividend, share repurchase, and its plans
regarding its cash and investment balances.

Related Criteria And Research
-- Methodology And Assumptions: 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

Ratings List

Ratings Placed On CreditWatch
To From
Washington Post Co.
Corporate Credit Rating BBB+/Watch Neg/A-2 BBB+/Negative/A-2
Senior Unsecured BBB+/Watch Neg BBB+
Commercial Paper A-2/Watch Neg A-2