Cengage Hires Restructuring Advisers as It Draws Down Credit

Cengage Learning Inc., the textbook publisher owned by Apax Partners LLP, said it has drawn down $430 million from its revolving credit lines and is getting restructuring advice from Alvarez & Marsal.

The money was “virtually the entire remaining amount available,” according to a statement posted on its website. The company said it’s also working with law firm Kirkland & Ellis LLP and financial adviser Lazard Ltd. “as part of its ongoing efforts to assess its capital structure.”

The move raises the prospect of bankruptcy for Cengage, a developer of teaching materials for colleges, schools, libraries and corporations. Apax led the group that acquired the educational publisher from Thomson Reuters Corp. for $7.75 billion in 2007.

“We continue to evaluate all alternatives to address our capital structure and intend to use all the tools and resources available to us to address it,” James McCusker, a Cengage spokesman, said in an e-mailed response to questions about a possible bankruptcy filing. “We are reviewing a range of options to strengthen our balance sheet and give us the ability to position our company for long-term growth and success.”

Shrinking Credit

Cengage has $525 million in revolving credit, an amount poised to shrink to $300 million in July. The company said today it has drawn $518 million from the revolvers and has about $490 million in cash. It had about $5.36 billion in debt at the end of 2012, including more than $2 billion due next year, and reported an 18 percent drop in revenue for the six months ended Dec. 31.

“We are borrowing more under the revolver this year because it is important to demonstrate our liquidity given our year-to-date performance and our resulting lower cash position,” McCusker said.

The company spent $50 million buying back its own debt at a discount last quarter, Chief Executive Officer Michael Hansen said on a February conference call. Apax has been buying up the publisher’s debt at a discount, he said then, referring further questions to the London-based buyout firm.

Hansen, who joined the publisher in September, has revamped management and shifted to more digital products and subscriptions to help revive revenue as students increasingly shy away from buying textbooks new.

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