Houghton Mifflin Harcourt Files Chapter 11 Bankruptcy

Posted on 5/29/2012 by Jim Pickerell | Printable Version | Comments (0)

Houghton Mifflin Harcourt (HMH) filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.  The “pre-packaged” comprehensive financial restructuring plan will eliminate $3.1 billion of the company’s debt through a debt to equity transaction with its bank and bond holders. It will also save the company $250 million in annual interest costs.
The company’s reorganization plan calls for the conversion of its bank and bond debt into a 100 percent equity stake in a reorganized company. As of May 11, more than 70 percent of the company’s senior secured lenders and bondholders had reached an agreement with HMH. In court documents the company said it had between 200 and 999 creditors.

Houghton Mifflin Harcourt will maintain normal day-to-day business operations throughout the restructuring process which is expected to be completed by the end of June 2012. The company expects no disruptions to their relationships with customers, agents, authors, employees, business partners and suppliers.

Many photographers and stock agents that have on going suits against HMH for unauthorized use of their photos are concerned about how the bankruptcy might affect their cases. All action on the cases has been stopped until HMH emerges from bankruptcy which is expected to be June 30, 2012. Lawyers representing the plaintiffs expect the cases to move forward in the normal manner after that date.
Linda K. Zecher, President and CEO of Houghton Mifflin Harcourt said, “This financial restructuring will insure the company can invest in growth areas and serve our partners, customers and educators, teachers, parents, students and others even better than before. With less debt on our balance sheet HMH will have additional resources and greater flexibility to continue growth into new markets and serve our customers more broadly….   We expect that there will be no disruption to our relationships with employees, customers, business partners or suppliers. … It (the plan) calls for our suppliers and vendors to be paid in full in the ordinary course of business.”

The "pre-packaged" bankruptcy comes as state and local governments cut their budgets, reducing demand for textbooks for students from kindergarten to 12th grade. Textbooks are Houghton Mifflin Harcourt's main business.

According to Fitch Ratings HMH has a 41 percent market share in the K-12 educational material and services sector. The company’s products serve 60 million students in 120 countries.

In court documents the estimated assets of the company were between $10 and $50 million. For more about the restructuring see www.hmhco.com/restructuring.

Copyright © 2012 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  


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