Riverdeep liquidates €1.39bn in subsidiary assets

Education publisher HM Riverdeep has initiated an internal restructuring, involving the liquidation of subsidiaries holding $1.89 billion (€1.39 billion) in assets, as a prelude to the move of its ultimate parent company to the Cayman Islands.

The reorganisation comes in advance of an extraordinary general meeting (egm) in Dublin next Monday, at which shareholders will approve the move of the company to the Caymans from Ireland. A spokeswoman said the egm was a formality as the group already has the necessary consents for this change.

Formed late last year from the $4.95 billion reverse takeover of US publisher Houghton Mifflin by online education firm Riverdeep, HM Riverdeep is controlled by businessman Barry O'Callaghan. Management and Mr O'Callaghan own more than half of the enlarged group.

Mr O'Callaghan raised $3.14 billion in debt from Credit Suisse and Citigroup to fund the deal, in addition to $350 million in preferred equity and $660 million in equity from investors, including many Davy Stockbrokers' clients.

The group has told investors that the regulatory regime in Cayman is "less onerous" and that the move there will give it more flexibility to make distributions to investors. It also said the Cayman vehicle - Education Media and Publishing Group - will enjoy greater confidentiality over its business information.

In advance of that move, the group last week started the voluntary liquidation of two Dublin subsidiaries. Liquidator Michael McAteer of Foster McAteer was appointed to execute the winding up of Houghton Mifflin Riverdeep Group Holdings Ltd, which has $1.26 billion in assets, and Houghton Mifflin Riverdeep Ltd, which has assets of $630 million.

The assets will be transferred to another part of the HM Riverdeep organisation. The spokeswoman said external consent was not required for that process as both entities were "intermediate companies".

The transfer of assets from the parent to the Cayman vehicle has not begun. Asked why the reorganisation was taking place at this time, she said HM Riverdeep was left after multiple transactions with an unwieldy structure "which consisted of a number of intermediate holding companies that were not trading entities and served no purpose".

She continued: "The reason for the reorganisation is to create distributable reserves in order to be in a position to do a dividend recap and return capital to shareholders. We can think about that now because the group is trading well post the merger."

HM Riverdeep will appoint auditors in Cayman and provide investors with an annual financial update and convene an annual general meeting.

Ernst & Young resigned in February as auditor to Riverdeep over "incorrect representations" about a US contract. Mr O'Callaghan said then that he had taken "corrective" action and that the issue in question led to only an "immaterial" adjustment to Riverdeep's accounts for the first nine months of 2006.