Bloomberg News

Houghton Mifflin Wins Conditional Court Approval of Loan

May 22, 2012

Houghton Mifflin Harcourt Publishing Co., the publisher of authors from Mark Twain to J.R.R. Tolkien, won conditional permission to borrow $400 million of a $500 million loan to fund operations during a 30-day reorganization.

U.S. Bankruptcy Judge Robert Gerber in New York said today he was prepared to approve the company’s interim request to borrow the loan, which is to be managed and syndicated by Citigroup Inc. (C:US)

“Subject to the issues that I have, which I think are drafting issues, I’m fine with this facility,” Gerber said. He approved other routine first-day requests today, including a bid to pay contractors and 3,300 full-time employees.

The publisher sought bankruptcy protection yesterday to eliminate more than $3 billion in debt and has a prepackaged plan backed by creditors. A hearing is set for June 21 to seek approval of the plan.

“We ask your honor to move quickly toward a confirmation hearing” to execute the plan, which won the votes of 90 percent of secured creditors and 76 percent of equity holders, Jeffrey D. Saferstein, a lawyer for the company, told Gerber today.

The company, based in Boston, listed $2.68 billion in assets and $3.53 billion in debt in Chapter 11 documents.

Creditors Repaid

Under the proposed reorganization, Houghton’s long-term bank loan and bond debt will be repaid in full through all of the equity in the reorganized company plus $30 million in cash, according to a May 11 statement. Existing shareholders will receive warrants for 5 percent of the new stock if they vote in favor of the plan.

The $500 million loan will convert to exit financing. Citigroup, also a pre-bankruptcy lender to the company, is agent to a $235.8 million revolving credit facility and a $2.57 billion term loan.

The company’s other pre-bankruptcy debt includes $300 million in 10.5 percent notes due 2019. The notes traded recently at 61.4 cents on the dollar, down from their 52-week high of 101 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

There is some concern that Houghton’s case shouldn’t be based in New York since most of its business is in Boston or elsewhere, Andrea Schwartz, a lawyer for the U.S. Trustee, said in court today. The U.S. Trustee is an arm of the Justice Department that oversees bankruptcies. Gerber said he would take further evidence on that issue in court papers.


Houghton’s bankruptcy comes as traditional print-book publishing faces growing competition from e-books. Sales of adult paperbacks and hardcover books fell 18 percent from 2010 to 2011, according to the Association of American Publishers. Borders Group Inc., the second-largest U.S. bookstore chain, filed for bankruptcy in February 2011.

“The global financial crisis over the past several years has negatively affected” Houghton’s financial performance, in a business that “depends largely on state and local funding” for the schoolbook market, William Bayers, company general counsel, said in court papers explaining the filing.

Houghton provides educational products and services to about 60 million students in 120 countries, according to its website. The company also prints and distributes electronic books owned by one of Inc. (AMZN:US)’s publishing arms, under an agreement announced in January.

Houghton’s origins date to 1832, according to the company. Among its authors are Ralph Waldo Emerson and Jonathan Safran Foer, and the company’s titles include the “Curious George” and “Lord of the Rings” books.

The case is In re Houghton Mifflin Harcourt Publishing Co, 12-bk-12171, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at

To contact the editor responsible for this story: John Pickering at

The Aging of Abercrombie & Fitch

Companies Mentioned

  • C
    (Citigroup Inc)
    • $48.77 USD
    • 0.15
    • 0.31%
  • AMZN
    ( Inc)
    • $308.61 USD
    • -3.78
    • -1.22%
Market data is delayed at least 15 minutes.
blog comments powered by Disqus