Houghton Mifflin Harcourt in Boston, Massachusetts (Photo credit: Wikipedia)

Another publisher bankruptcy. I saw this last Friday in this post on the Passive Voice blog: Houghton Mifflin Harcourt Enters Bankruptcy Process.

The article blames the bankruptcy on debt from leveraged buyouts in 2006 and 2007. It seems they were in trouble almost right away, having temporarily stopped acquiring new books in 2008. No mention of e-books or self-publishing playing a role.

This also seems a bit unusual in that a Chapter 11 deal was pre-negotiated with over 70% of senior lenders and bondholders (those with first dibs on assets in a liquidation) to convert their $3.1B debt to equity. I suspect the “negotiation” was along the lines of “your only alternative is to take five cents on the dollar in a liquidation” (they have $135M cash on hand, 4.4% of their debt; not sure of other assets but the lawyers and accountants would chew up a large chunk).

No word on what their current shareholders think of this massive dilution in their investment. But again, it’s likely a case of “you can take a haircut or a beheading.” Continue reading →