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Houghton Mifflin Harcourt Files Chapter 11

The Boston based publisher, Houghton Mifflin Harcourt (HMH), best known as a publisher of educational and reference books is going through a Chapter 11 corporate restructuring. HMH lists their current debt at $3.1 billion dollars. They have acquired a $500 million committment in financing from Citigroup Global Markets. While this will ease the current debt crunch, it will not eliminate it, and some major corporate restructuring will be taking place.

In a press release from HMH: “Houghton Mifflin Harcourt has reached an agreement on the terms of a comprehensive financial restructuring plan that will strengthen the Company financially so we can continue to invest in our business and ensure we are well-positioned for the future. 

This plan, which is supported by a majority of our key financial stakeholders, will eliminate $3.1 billion of debt through a debt-to-equity transaction, and will reduce our annual cash interest costs. With a more appropriate capital structure to support our strategic plan and business objectives, we will have greater financial flexibility to pursue growth opportunities in the digital, consumer and international markets. To make this plan agreement legally binding, we anticipate implementing it by filing a “pre-packaged” plan of reorganization under chapter 11 of the U.S. Bankruptcy Code in the near future. 

Houghton Mifflin Harcourt will maintain normal day-to-day business operations throughout the restructuring process, with no disruptions to our relationships with our customers, agents, authors, employees, business partners or suppliers.

Our customers will continue to receive the high-quality content they have come to expect from us, and service without interruption. Additionally, our plan provides for our suppliers and vendors to be paid in full during and after this process and for our employees to continue receiving their usual pay and benefits.

Because of the high level of support we have obtained from our lenders, bondholders and shareholders for our plan, we expect to complete this financial restructuring quickly, likely by the end of June 2012.

The Wall Street Journal attributes much of HMH’s financial struggle to the economy, saying in a recent article:  “Houghton has struggled amid budget cuts by state and local governments that buy the company’s K-12 textbooks, according to ratings firm Moody’s Investors Service. That market, which Houghton relies on for the bulk of its revenue, has fallen 48% over the past four years, Moody’s said.”

 

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