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Tuesday, May 22, 2012

Textbook Giant brought to knees by economy

Houghton Mifflin files Chapter 11 bankruptcy


Textbook publisher hurt by government cutbacks

Jonathan Stempel (Reuters) reports that  Houghton Mifflin Harcourt Publishers Inc, whose textbooks have been a staple in American schoolhouses for decades, filed for Chapter 11 bankruptcy protection on Monday after agreeing with creditors to eliminate $3.1 billion of debt.

The "pre-packaged" bankruptcy would give control of Houghton Mifflin to its lenders.

It comes as cash-strapped state and local governments defer or cancel education-related purchases, reducing demand for textbooks for students from kindergarten to 12th grade.

Traditional book publishers also face pressure from the online availability of published material, including e-books.

Houghton Mifflin has a 41 percent market share in the K-12 educational material and services sector, and its education business accounts for about 90 percent of revenue.

The Boston-based company lost $2.18 billion last year, including a $1.67 billion writedown, as net sales fell 14 percent to $1.3 billion.

Houghton Mifflin and two dozen affiliates filed for protection in U.S. bankruptcy court in Manhattan.

In a court filing, general counsel William Bayers said the reorganization has support from 90.3 percent of creditors and 76 percent of equity investors eligible to vote.

Houghton Mifflin expects to emerge from bankruptcy by June 30. The company said it has $2.68 billion of assets and $3.54 billion of liabilities, and employs 3,300 people.

With a history dating to 1832, Houghton Mifflin said its products serve 60 million students in 120 countries.

The company also publishes the "Curious George" and J.R.R. Tolkien's "Lord of the Rings" children's book series, and games such as "Where in the World is Carmen Sandiego?"

Houghton Mifflin also agreed in January to distribute titles from an Amazon.com Inc publishing unit.

1 comment:

Rick Spilman said...

Two of the early partners in Houghton Mifflin published Ralph Waldo Emerson, Nathaniel Hawthorne, and Henry David Thoreau.

Houghton Mifflin is just another casualty of corporate M&A and specifically of the "job creators" at Bain Capital, or more precisely of a club deal involving Bain, Thomas H. Lee Partners and The Blackstone Group.

In 2001, Houghton Mifflin was acquired by French media giant Vivendi Universal for $2.2 billion including assumed debt. Bain Capital and its partners acquired Houghton Mifflin in 2002 for $1.28 billion, plus $380 million of debt. They then sold it to Riverdeep, PLC in 2006 for $3.36 billion, of which $1.75 billion was in cash and $1.61 billion in the assumption of debt. Vivendi lost money but Bain and its partners made out like bandits.

Education Media and Publishing Group (EMPG) acquired Riverdeep in 2006. In 2007 Houghton Mifflin Riverdeep acquired Harcourt for $4 billion. By February of 2010, Houghton Mifflin had $5 billion in debt. They underwent a major recapitalization in 2010 to raise equity and bring down the debt.

The current “pre-packaged” bankruptcy will eliminate $3.1 billion of debt through a debt to equity swap.

I wonder what Thoreau, Emerson or Curious George would have thought of the spectacle.