Will Chapter 11 Bankruptcy Rescue Houghton Mifflin Harcourt?

Houghton Mifflin Harcourt Building, Boston, MA. Photo by Peter Vagt 2009.

Houghton Mifflin Harcourt publications, the well-known publisher of text books, children’s books, trade and reference materials, fiction and non-fiction books for all readers, filed its Chapter 11 bankruptcy petition on May 21, 2012.
Will Curious George get laid off? Will the Little Blue Truck find its way out of this jam? Will Karana return to her Island of the Blue Dolphins? Will the kids in Room 207 ever find out why Miss Nelson Is Missing? We can only hope that these and other familiar children’s stories remain in this publisher’s inventory for many years to come.
Recent History of Houghton Mifflin Harcourt
The Boston, Massachusetts, publishing house was founded in 1880. Since the acquisition of Houghton Mifflin by Vivendi Universal in 2001 for $2.2 billion, however, the company has experienced continuous change. Here’s a recent historical review in brief:
● 2001: Vivendi Universal (France) purchases Houghton Mifflin for $2.2 billion.
● 2002: Vivendi sells Houghton Mifflin at a loss to Thomas H. Lee Partners, Bain Capital, and The Blackstone Group for $1.66 billion.
● 2006: RiverdeepPLCacquires Houghton Mifflin for $1.75 billion (assuming $1.61 billion in debt), making it the Houghton Mifflin Riverdeep Group.
● 2007: Houghton Mifflin Riverdeep Group acquires Harcourt Education in America for $4 billion, making it Houghton Mifflin Harcourt (HMH).
● 2008: HMH freezes new trade division title acquisitions which was quickly followed by the division publisher’s resignation.
● 2009: HMH’s holding company and largest shareholder Education Media & Publishing Group (EMPG) restructures. TheDubairoyal family’s Istithmar World Capital investment company becomes the major shareholder of EMPG.
● 2009: Reuters reports that HMH ranks among the worst 10 companies to work for.
● 2010: HMH (and EMPG) restructures and recapitalizes.
● 2012: HMH files Chapter 11.
Many believe that HMH (like Borders Group, Inc., before it in 2011) is suffering from the financial consequences of explosive competition from the e-book market. In addition, HMS General Counsel William Bayers stated that “[t]he global financial crisis over the past several years has negatively affected [HMS]” which relies “largely on state and local funding” to schools which, in turn, buy text books.
Houghton Mifflin Harcourt Restructures, Again
The HMH pre-packaged financial restructuring plan was filed in the U.S. Bankruptcy Court for the Southern District of New York and will reduce costs and eliminate $3.1 billion in debt if approved.
HMH anticipates completing the restructuring process before July 2012, assuring “customers, agents, authors, employees, business partners and suppliers” that day-to-day operations will continue unimpeded during the Chapter 11 process. Employees will continue getting regular paychecks. Vendors and suppliers will continue getting paid as usual.
Bankruptcy Court Conditionally Approves HMH Interim Loan Request
The bankruptcy court has conditionally approved HMH’s interim request to borrow 4/5ths of a $500 million Citigroup, Inc., loan to keep the publisher operating during the 30-day Chapter 11 reorganization process.
In its Chapter 11 petition and supporting affidavits and documents, HMH listed assets of $2.68 billion and debts of $3.53 billion.