Cengage files for Chapter 11

Cengage files for Chapter 11

Cengage Learning has filed for Chapter 11 bankruptcy protection as part of a pre-arranged agreement which would help it wipe out more than $4 billion of debt.

Late last night (2nd July), the US textbook publisher announced an agreement with some of its lenders to restructure its balance sheet and significantly reduce its outstanding debt to “better position the company for long term growth and profitability".

As part of the restructure, Cengage and its subsidiaries have filed for voluntary  reorganisation under the US Chapter 11 Bankruptcy code in New York.

The company has also entered into a restructuring agreement with “an ad hoc committee of first lien lenders” which hold approximately $2 billion of the Company’s first lien debt. “In this agreement, the lenders committed to support a restructuring transaction that will eliminate more than $4 billion in debt from Cengage Learning’s balance sheet and position the company to implement management’s strategic business plan,” Cengage said.

Michael Hansen, c.e.o. of Cengage Learning, said the company would continue “normal business operations” and expected no disruptions to customers or suppliers. He added that a “more appropriately-sized capital structure,” would position the company well to accelerate growth and take advantage of business opportunities in the education and research space.

He said: “The decisive actions we are taking today will reduce our debt and improve our capital structure to support our long-term business strategy of transitioning from traditional print models to digital educational and research materials.

"Cengage Learning began an operational transformation six months ago under the leadership of our new senior management team, which is executing bold plans to enhance our customer relationships and introduce innovative digital and print products and solutions to meet our customers’ evolving needs.”

He added that the company was grateful for the support of its key financial stakeholders in the restructuring process.

Cengage maintains substantial cash balances and expects to generate positive cash flow, Hansen said.