Moody's withdraws credit rating for Houghton Mifflin

INTERNATIONAL AGENCY Moody’s has withdrawn its credit ratings for Houghton Mifflin Harcourt (HMH), Irish businessman Barry O’Callaghan’s US publishing operation.

Moody’s, which measures and rates businesses’ ability to repay their debts, said yesterday that it was withdrawing rating for all of HMH’s debt securities.

The move will increase HMH’s borrowing costs as it means that the agency believes the company’s debts are high risk.

HMH is heavily indebted and owes lenders around $6.7 billion. Its creditors recently agreed to relax the repayment terms of some of these loans.

The ratings agency said that about $6.4 billion worth of securities were affected. The classes of security involved include senior secured debt.

Moody’s has also withdrawn HMH’s “corporate family” rating and its probability of default rating.

The withdrawal means that the agency believes that there is a high probability of the company defaulting on its debts.

Moody’s said that it took into account “the business risk and competitive position of the company versus others within its industry; the capital structure and financial risk of the company; the projected financial and operating performance of the company over the near-to-intermediate term, and management’s track record and tolerance for risk”.

Last month, Moody’s downgraded some of HMH’s debts to Caa3 from Caa1, and put it on a negative outlook. The move meant that it classed the company’s debts as high risk.

Mr O’Callaghan created Boston-based HMH through the reverse takeover of Boston educational and literary publisher Houghton Mifflin by his Irish-based education software firm Riverdeep.

The enlarged company later acquired Harcourt, the consumer publishing unit of Reed Elsevier.

In March, Mr O’Callaghan cancelled the sale of the group’s consumer books division after considering three approaches.

HMH is one of the biggest educational publishers in the US and has sales of approximately $2.1 billion. Mr O’Callaghan, who is chairman of the overall publishing group, recently took over as chief executive of HMH.

The company is based in Boston, Massachusetts.