May 17, 2012
By: John Clark
Houghton Mifflin Harcourt, the venerable publisher of educational and trade resources, has filed a prearranged bankruptcy petition after coming to an agreement with its creditors, according to a report from The New York Times.
The Boston-based publishing company has come to terms with more than 70 percent of its primary creditors to eliminate more than $3 billion of debt in bankruptcy court, according to the company.
Houghton Mifflin Harcourt has promised that its business operations would continue without interruption during the bankruptcy process, and that its restructuring plan would simply convert its current long-term debt into equity.
The publishing giant has struggled with debt for a few years after being purchased by Education Media and Publishing Group, an Irish investor, in 2006. The debt-financed acquisition merged Houghton Mifflin and Harcourt, which had previously been two separate entities.
According to Linda Zecher, the president of the company, the reorganization is “positive news” for a company that finds itself in the midst of a struggling publishing industry.
Competition from Internet vendors has reduced the role of traditional publishing companies, although Houghton Mifflin Harcourt recently struck an important deal with Amazon, which is the looming giant that threatens to submerge the old publishing guard.
And the appearance of a bankruptcy attorney at the company’s doors does not necessarily portend doom for the publisher. On the contrary, some people are very optimistic about the company’s future.
Sources say that employees of the firm will continue to receive paychecks as usual, and there are no plans for any layoffs. In addition, according to Zecher, the company has more than $135 million in available cash to continue to meet its operational costs.
The publisher’s trade division has published books written by a broad range of popular authors, including Philip Roth, J.R.R. Tolkien, and Jonathan Safran Foer.
In 2008, the company surprised many observers when it stopped acquiring new books, although this move was only temporary.
Despite such alarming signs, Zecher believes the company’s long-term future is bright, and she told sources that she thinks the bankruptcy process will be finalized by the end of June.