MHGE Parent, LLC McGraw-Hill Global Education Holdings, LLC

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1 CURRENT REPORT Pursuant to Section 4.02(a)(iii) of the Indenture, dated July 17, 2014, governing the 8.500% / 9.250% Senior PIK Toggle Notes due 2019 of MHGE Parent, LLC and MHGE Parent Finance, Inc. Pursuant to Section 4.02(a)(iii) of the Indenture, dated May 6, 2016, governing the 7.875% Senior Notes due 2024 of McGraw-Hill Global Education Holdings, LLC and McGraw-Hill Global Education Finance, Inc. May 4, 2016 Date of Report (Date of earliest event reported) MHGE Parent, LLC McGraw-Hill Global Education Holdings, LLC 2 Penn Plaza, 20th Floor New York, New York Telephone:

2 Item 1.01 Entry into a Material Definitive Agreement Overview of Transactions On May 4, 2016, McGraw-Hill Global Education Intermediate Holdings, LLC ( MHGE Intermediate Holdings ), a direct wholly owned subsidiary of MHGE Parent, LLC ( MHGE Parent ), announced that (i) two of its wholly owned subsidiaries, McGraw-Hill Global Education Holdings, LLC ( MHGE Holdings ) and McGraw-Hill Global Education Finance, Inc. (together with MHGE Holdings, the Issuers ), have closed their offering (the Notes Offering ) of $400 million aggregate principal amount of 7.875% Senior Notes due 2024 (the Notes") in a private placement, (ii) MHGE Holdings entered into of new senior secured credit facilities (the Senior Facilities ) of up to $1,925 million, and (iii) MHGE Intermediate Holdings completed a reorganization in which McGraw-Hill School Education Intermediate Holdings, LLC ( MHSE ) became a direct subsidiary of MHGE Holdings. The proceeds from the Notes Offering and the Senior Facilities were used to (i) repay each of MHGE Holdings and MHSE s existing credit facilities, (ii) repurchase approximately $522 million aggregate principal amount of the Issuers 9.75% First-Priority Senior Secured Notes due 2021 (the Secured Notes ) pursuant to the previously announced tender offer, (iii) fund a cash distribution to MHGE Holdings ultimate equity holders and (iv) pay certain related fees and expenses. The Issuers expect to repurchase or redeem the approximately $278 million aggregate principal amount of Secured Notes that remain outstanding on or before May 18, 2016 using the proceeds of the Notes Offering and Secured Facilities together with cash on hand. Indenture The Notes were issued pursuant to an Indenture, dated as of May 4, 2016 (the Indenture ), among the Issuers, certain wholly owned domestic subsidiaries of MHGE Holdings party thereto as subsidiary guarantors (the Notes Guarantors ) and Wilmington Trust, National Association, as trustee. The Issuers obligations under the Notes and the Indenture are guaranteed by the Notes Guarantors. The Notes and the related guarantees are senior unsecured obligations of the Issuers and the Notes Guarantors. The Notes will mature on May 15, Interest on the Notes will accrue at 7.875% per annum and will be paid semi-annually, in arrears, on May 15 and November 15 of each year, beginning November 15, On or after May 15, 2019 the Issuers may redeem the Notes at their option, in whole at any time or in part from time to time, at the redemption prices set forth in the Indenture. In addition, prior to May 15, 2018 the Issuers may redeem the Notes at their option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus a make-whole premium and accrued and unpaid interest and additional interest, if any. Notwithstanding the foregoing, 2

3 at any time and from time to time on or prior to May 15, 2019 the Issuers may redeem in the aggregate up to 40% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional notes) in an aggregate amount equal to the net cash proceeds of one or more equity offerings at a redemption price equal to %, plus accrued and unpaid interest and additional interest, if any, so long as at least 50% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional notes) must remain outstanding after each such redemption. The Indenture contains covenants that limit the Issuers and their restricted subsidiaries ability to, among other things: (i) incur additional indebtedness or issue certain preferred shares; (ii) make dividend payments on or make other distributions in respect of its capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting its restricted subsidiaries; (vi) create liens on assets to secured debt; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and (viii) enter into certain transactions with affiliates. Additionally, upon the occurrence of specified change of control events, the Issuers must offer to repurchase the Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. The foregoing description of the Indenture does not purport to be complete and is qualified in its entirety by the text of the Indenture, which is attached as Exhibit 4.1 and incorporated by reference herein. Senior Facilities Concurrently with the completion of the Notes Offering, MHGE Holdings entered into a entered into a credit agreement and related security and other agreements with Credit Suisse AG, Cayman Islands Branch, as administrative agent, that provides the Senior Facilities of up to $1,925 million, consisting of (a) a term loan facility in an aggregate principal amount of $1,575 million with a maturity of 6 years; and (b) a revolving credit facility in an aggregate principal amount of up to $350 million with a maturity of 5 years, including a letter of credit sub-facility. In addition, MHGE Holdings may request one or more incremental term loan facilities and/or increase commitments under the revolving facility in an aggregate amount of up to the sum of (x) $425 million plus (y) such additional amount if MHGE Holdings attains certain leverage ratios, subject to certain conditions and receipt of commitments by existing or additional lenders. Interest Rates and Fees Borrowings under the Senior Facilities bear interest at a rate equal to, at the option of MHGE Holdings, either (a) a LIBOR rate determined by reference to the 3

4 costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 1.00% floor in the case of term loans or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate of Credit Suisse AG and (iii) the one-month adjusted LIBOR plus 1.00%, in each case plus an applicable margin. The initial applicable margin for borrowings is 4.00% with respect to LIBOR borrowings and 3.00% with respect to base rate borrowings. In addition to paying interest on outstanding principal under the Senior Facilities, MHGE Holdings is required to pay a commitment fee of 0.50% per annum to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The applicable commitment fee under the revolving credit facility may be reduced if MHGE Holdings attains a certain leverage ratio. MHGE Holdings is also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR rate borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer s customary documentary and processing fees and charges and a fronting fee computed at a rate equal to 0.125% per annum on the daily stated amount of each letter of credit. In addition, MHGE Holdings paid lenders upfront fees equal to 0.50% of the aggregate principal amount of term loans funded on the closing date and 0.50% of the aggregate principal amount of the commitments under the revolving credit facility on the closing date. Amortization and Prepayments The Senior Facilities will require scheduled quarterly payments on the term loans in amounts equal to 0.25% of the original principal amount of the term loans commencing with the end of the first full fiscal quarter ending after the closing date, with the balance paid at maturity. In addition, MHGE Holdings is required to prepay outstanding term loan borrowings, subject to certain exceptions, with: 50% (which percentage will be reduced to 25% and further reduced to 0% if MHGE Holdings attains certain leverage ratios) of MHGE Holdings annual excess cash flow (as defined under the Senior Facilities); 100% of the net cash proceeds of all non-ordinary course asset sales or other nonordinary course dispositions of property or certain casualty events, in each case subject to certain exceptions and provided that we may (a) reinvest within 12 months or (b) commit to reinvest those proceeds and so reinvest such proceeds within 18 months in assets to be used in its business, or certain other permitted investments; and 100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the Senior Facilities. The foregoing mandatory prepayments will generally be applied pro rata among the term loans. 4

5 MHGE Holdings may voluntarily repay outstanding loans under the Senior Facilities at any time, without prepayment premium or penalty except in connection with a repricing event as described below, subject to customary breakage costs with respect to LIBOR rate loans. Any refinancing through the issuance or repricing amendment of any debt that results in a repricing event applicable to the term loans resulting in a lower yield occurring at any time during the first six months after the closing date of the closing date of the Senior Facilities will be accompanied by a 1.00% prepayment premium or fee, as applicable. Collateral and Guarantors All obligations under the Senior Facilities are unconditionally guaranteed by each of MHGE Holdings existing and future direct and indirect material, wholly owned domestic subsidiaries (the Facilities Guarantors ), subject to certain exceptions. The obligations are secured by substantially all of MHGE Holdings assets and those of each Facilities Guarantor and (prior to an IPO (as defined under the Senior Facilities)) MHGE Intermediate Holdings, including a pledge of MHGE Holdings capital stock (prior to an IPO), capital stock of the Facilities Guarantors and 65% of the capital stock of the first-tier foreign subsidiaries that are not subsidiary guarantors, in each case subject to certain exceptions. Such security interests will consist of a first-priority lien with respect to the collateral. Restrictive Covenants and Other Matters The revolving credit facility requires that MHGE Holdings, after an initial grace period and subject to a testing threshold, comply on a quarterly basis with a maximum first lien net senior secured leverage ratio of (a) with respect to the first, third and fourth fiscal quarters of any year, 4.80 to 1.00 and (b) with respect to the second quarter of any fiscal year, 5.25 to The testing threshold will be satisfied at any time at which the sum of outstanding revolving credit facility loans and certain letters of credit exceeds a certain amount of the outstanding commitments under the revolving credit facility at such time. The Senior Facilities contain certain customary affirmative covenants and events of default. The negative covenants in the Senior Facilities include, among other things, limitations (none of which are absolute) on the ability of MHGE Holdings and its restricted subsidiaries to: (i) incur additional debt or issue certain preferred shares; (ii) create liens on certain assets; (iii) make certain loans or investments (including acquisitions); (iv) pay dividends on or make distributions in respect of its capital stock or make other restricted payments; (v) consolidate, merge, sell or otherwise dispose of all or substantially all of the assets; (vi) sell assets; (vii) enter into certain transactions with affiliates; (viii) enter into sale-leaseback transactions; (ix) change its lines of business; (x) restrict dividends from their subsidiaries or restrict liens; (xi) change MHGE Holdings fiscal year; and (xii) modify the terms of certain debt or organizational agreements. 5

6 McGraw-Hill Education, Inc. and MHGE Intermediate Holdings will not be bound by any financial or negative covenants contained in the Senior Facilities, other than, in the case of MHGE Intermediate Holdings prior to an IPO, with respect to the incurrence of liens on and the pledge of our capital stock and with respect to the maintenance of its existence. The foregoing description of the Senior Facilities does not purport to be complete and is qualified in its entirety by the text of the credit agreement governing the Senior Facilities, which is attached as Exhibit 10.1 and incorporated by reference herein. Item Termination of a Material Definitive Agreement. On May 4, 2016, (i) MHGE Holdings repaid all amounts outstanding and terminated all commitments under the credit facilities governed by that certain First Lien Credit Agreement, dated as of March 22, 2013 (as amended, supplemented or otherwise modified from time to time), among MHGE Intermediate Holdings, MHGE Holdings, the lender party thereto, Credit Suisse AG, Cayman Islands Branch, as administrative agent, and (ii) MHSE repaid all amounts outstanding and terminated all commitments under the credit facilities governed by MHSE s First Lien Credit Agreement, dated as of December 18, 2013 (as amended, supplemented or otherwise modified from time to time), and MHSE s Asset Based Revolving Credit Agreement, dated as of March 22, 2013 (as amended, supplemented or otherwise modified from time to time). Item 2.03 Creation of a Direct Financial Obligation. The information set forth under Item 1.01 above is incorporated by reference into this Item Item 8.01 Other Events. On May 4, 2016, the Issuers defeased and discharged the Indenture, dated as of March 22, 2013, between the Issuers, the guarantors party thereto and Wilmington Trust, National Association, as trustee, governing the Secured Notes, and the collateral securing the Secured Notes was released. Item 9.01 Financial Statements and Exhibits (d) Exhibits Exhibit No. Description 4.1 Indenture, dated as of May 4, 2016, among McGraw-Hill Global Education Holdings, LLC, McGraw-Hill Global Education Finance, Inc., the subsidiary guarantors party thereto and Wilmington Trust, National Association. 6

7 10.1 First Lien Credit Agreement, dated as of May 4, 2016, among McGraw-Hill Global Education Intermediate Holdings, LLC, McGraw-Hill Global Education Holdings, LLC, the lender party thereto, and Credit Suisse AG, Cayman Islands Branch Press Release, dated May 4,

8 SIGNATURES The Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MHGE PARENT, LLC MCGRAW-HILL GLOBAL EDUCATION HOLDINGS, LLC By: /s/ David Stafford Name: David Stafford Title: Senior Vice President and General Counsel Date: May 10, 2016

9 EXHIBIT INDEX Exhibit No. Description 4.1 Indenture, dated as of May 4, 2016, among McGraw-Hill Global Education Holdings, LLC, McGraw-Hill Global Education Finance, Inc., the subsidiary guarantors party thereto and Wilmington Trust, National Association First Lien Credit Agreement, dated as of May 4, 2016, among McGraw-Hill Global Education Intermediate Holdings, LLC, McGraw-Hill Global Education Holdings, LLC, the lender party thereto, and Credit Suisse AG, Cayman Islands Branch Press Release, dated May 4, 2016.