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Publisher Houghton Mifflin Harcourt has staved off potential bankruptcy after its bankers agreed a deal to take over the company.
Chief executive Barry O'Callaghan, who created the group through a number of debt-financed deals, will remain in charge. The group has secured unanimous support from its lenders to restructure its finances, more than halving its debts, in part by wiping out the equity holders, the Financial Times reports.
The">http://www.thebookseller.com/news/109521-houghton-mifflin-harcourts-pare... deal was first mooted in January, when George Lee from the Irish political party Fine Gael said that Houghton Mifflin Harcourt revealed hat the US business was to be transferred to its bond holders and that a number of Irish equity investors would lose significant sums of money as a result.
Among those losing equity in a bid to cut the $7bn (£4.49bn) debt to around $3bn are chief executive Barry O'Callaghan and Reed Elsevier, which sold Harcourt to him in 2007. They will be left with warrants and a stake in EMPGi, the international educational publisher owned by Education Media & Publishing Group, HMH’s parent company.
But the deal sees more than $4bn of debt converted into equity, a move which should reduce interests payments from about $800m to less than $250m a year. HMH also expects to raise at least $500m from a $650m rights issue, the rest of which will pay down previously drawn lines of credit.
"We now have greater financial flexibility and freedom with a vastly improved capital structure," O’Callaghan said.