Houghton Mifflin Harcourt To Restructure Under Chapter 11

Houghton Mifflin Harcourt publishes fiction, nonfiction and educational software, but is undoubtedly best known as one of the leading publishers of textbooks. However, due in part to market changes, the company has been having financial struggles. But readers should not expect HMH to disappear as of yet. On Friday, the publisher announced in a press release that they have crafted “a comprehensive financial restructuring plan to convert HMH’s outstanding long-term debt to equity and create an appropriate capital structure” that will help the publisher get back onto firmer footing.

Weak market demand, including a lack of government funds set aside for purchasing new textbook editions, have contributed to the publisher’s struggle to make ends meet. The company has racked up an impressive amount of debt, however, the company has no plans to flounder on the edge of extinction. HMH President and Chief Executive Officer Linda K. Zecher says, “With a more appropriately-sized capital structure and greater financial flexibility, along with our world-class brand and innovative digital education solutions, we will be well-positioned to accelerate our growth initiatives and expand our digital platform.”

HMH is aggressively forging a path back toward financial stability with the help of “a ‘pre-packaged’ plan of reorganization … through a prompt, court-supervised, chapter 11 process.” By restructuring under the current proposal, $3.1 billion of debt will be “eliminated” and the annual cash interest costs will be reduced by about $250 million. In addition, to the help from the courts, Citigroup Global Markets has already pledged $500 million worth in order to aid HMH in their debt redistribution.

This plan has already found favor with “more than 70% of HMH’s senior secured lenders and bondholders.” It is now being brought the rest of the shareholders, bondholders and broader lender in order to be approved. However, the company is hopeful that this process will move swiftly. Their goal is to have the entire newly restructured company running by the end of June 2012.

“We are thrilled that our lenders recognize the long-term value of HMH, and are grateful for the support they have shown. This agreement speaks to their faith in HMH’s senior leadership,” added Zecher. “We will continue normal business operations, with no expected disruptions to our relationships with our employees, customers, business partners, or suppliers."

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