Reuters: Bankruptcy News: TEXT-Fitch cuts Houghton Mifflin Harcourt IDR to 'D'

Reuters: Bankruptcy News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

TEXT-Fitch cuts Houghton Mifflin Harcourt IDR to 'D' May 21st 2012, 14:48 Tweet Share this Email Print Related Topics Stocks » Bonds News » Bonds » Markets » Bankruptcy » Cyclical Consumer Goods » Mon May 21, 2012 10:48am EDT May 21 - Fitch Ratings has downgraded the Issuer Default Rating (IDR) of Houghton Mifflin Harcourt Publishers Inc. (HMH) and its subsidiaries to 'D' from 'C'. There is no assigned Rating Outlook. A full rating list follows at the end of this release. The downgrade impacts $3.1 billion in debt. HMH filed for bankruptcy today with a prepackaged plan converting its $3.1 billion in debt to equity. The company has obtained support from approximately 90% of the lending group (secured bank facilities and secured notes). In addition, HMH has obtained a $500 million financing commitment, which will provide sufficient liquidity to support seasonal working capital swings. As proposed, the current equity holders will receive warrants excisable for up to 5% of the company's equity. The restructuring will materially reduce leverage and cash interest burdens. This will provide HMH with additional flexibility to invest in its operations. HMH continues to be a leader in the K-12 educational material and services sector, capturing 41% of 2011 market share (adoption and open territory market [excluding Advanced Placement Sales] - based on Association of American Publishers (AAP) and company data. Fitch believes investments made into digital products and services will position HMH to take a meaningful share of the rebound in the K-12 educational market. Fitch's expects HMH will be able to, at a minimum, defend its market share. Fitch expects revenues to continue to decline in the low to mid- single digits in 2012. The education business is in a cyclical trough, and Fitch believes that HMH and its peers will benefit from the adoption of common core standards in 2014/2015. HMH Publishers' Recovery Ratings reflect Fitch's expectation that the enterprise value of the company, and hence recovery rates for its creditors, will be maximized in a restructuring scenario (going-concern) rather than liquidation. Fitch estimates an adjusted, distressed enterprise valuation of $1.4 billion using a 6 times (x) multiple. The 'RR4' Recovery Ratings for the secured debt represent an expected recovery in the range of 31% to 50%. Fitch has taken the following rating actions: HMH Publishers --IDR to 'D' from 'C'; --Secured first lien credit facility affirmed at 'C'/RR4; --Senior secured first lien notes affirmed at 'C'/RR4. Houghton Mifflin Harcourt Publishing Company --IDR to 'D' from 'C'. HMH Publishers LLC --IDR to 'D' from 'C'. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria & Related Research: --'Corporate Rating Methodology' (Aug. 12, 2011). Applicable Criteria and Related Research: Corporate Rating Methodology Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions