Houghton Mifflin Harcourt to File Chapter 11 Bankruptcy
Posted on May 12, 2012
Houghton Mifflin Harcourt Inc. will file bankruptcy in the near future, according to The Wall Street Journal. The book publisher will file a pre-packaged bankruptcy plan which has already been agreed to by its major creditors. The company will file, present the plan to the court and exit bankruptcy as soon as possible.
Houghton ended up in dire financial straits because of too much debt from an acquisition and plummeting sales of textbooks as states and municipalities cut spending for schools due to budget cuts. The company says that more than 70% of its senior secured lenders and bondholders have agreed to turn in their debt in exchange for ownership stakes in the company. Houghton will continue operations during the bankruptcy and will pay employees and normal operating debts.
To help with cash flow -- and paying its 3,600 employees-- Houghton has lined up a deal to get $500 million in financing from Citigroup Inc. By converting the debt into equity, the company will save around $250 million a year in interest costs.
