Houghton Mifflin Bonds at Record Low on Restructuring Report

Houghton Mifflin Harcourt Publishing Co. (282996Q) bonds fell to the lowest since they were issued after the Wall Street Journal reported the publisher is seeking to restructure its debt for the second time in two years.

The publisher’s $300 million of 10.5 percent bonds due in June 2019, which were issued in May, dropped to 57.125 cents on the dollar today, according to data compiled by Bloomberg. They were trading above 100 cents on the dollar, or par, as recently as June. The Boston-based company has $3.7 billion of debt outstanding.

“Like other companies with challenging balance sheets, we are looking at our options to make sure we position the company for long term growth,” Josef Blumenfeld, a senior vice president in corporate affairs, said in an e-mail. “We have no liquidity issues and no covenant issues,” he said. “We are very optimistic about our position in the market and the future.”

Houghton has retained the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP and the Blackstone Group LP (BX) as advisers, the newspaper reported today without identifying the people who gave it the information.

Moody’s Investors Service cut its corporate credit rating on Houghton for the second time in two months last week to Caa3, the third-lowest rating.

“The downgrade reflects Moody’s view that a debt restructuring in the near term is increasingly likely,” the ratings firm said in a March 13 report. Moody’s gave the company a negative outlook.

Government budget cuts after the worst U.S. recession in seven decades have delayed curriculum purchases, squeezing revenue for a company that made 90 percent of its 2011 sales through September from textbooks. The company might benefit from an Apple Inc. (AAPL) plan that would provide a lifeline by making digital versions of its education titles available on the iPad tablet computer.

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

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