Bloomberg News

Houghton Mifflin Debt Valued at 55.5 Cents in Swaps Auction

May 30, 2012

Credit derivatives traders settling contracts that protected against a default by Houghton Mifflin Harcourt Publishing Co. set a value of 55.5 cents on the dollar for the publisher that filed for bankruptcy this month.

The price, the result of a final round of bidding by 12 dealers including JPMorgan Chase & Co. and Barclays Plc, means sellers of the swaps would pay 44.5 cents on the dollar to buyers of protection to settle the contracts, according to data on an auction website from Markit Group Ltd. and broker Creditex Group Inc. A net demand to sell $16.165 million of the bonds, entirely from Goldman Sachs Group Inc., was matched with orders from the dealers and their clients, Markit and Creditex said.

The Boston-based publisher sought bankruptcy protection to eliminate $3.1 billion of debt through a debt-for-equity transaction in a plan backed by a majority of its “key financial stakeholders,” according to a May 21 statement from the company. Houghton Mifflin expects to complete its financial restructuring by the end of June, it said.

Sellers of credit-default swaps, used to hedge against losses or to speculate on creditworthiness, pay the buyer face value, less the value of the underlying debt. The International Swaps and Derivatives Association’s determinations committee ruled on May 22 that a so-called bankruptcy credit event occurred.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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