Moody’s Pulls Rating for Major Publisher

Publishing is being hit hard by a declining economy and rapidly changing technology. However, you’d think a publisher of textbooks would be somewhat ‘recession proof’. Not so. Moody’s last week withdrew its credit ratings for Houghton Mifflin Harcourt HMH), one of the biggest educational publishers in the US.

Moody’s, which measures and rates businesses’ ability to repay their debts, said that it would withdraw rating for all of HMH’s debt securities, believing the company’s debts are high risk. The result to HMH will be higher borrowing costs. The Boston, Massachusetts based firm has annual sales of approximately $2.1 billion.

According to the Irish Times, the company owes approximately $6.7 billion to it’s lenders. Creditors recently agreed to relax the repayment terms of some of these loans. Moody’s reported that about $6.4 billion worth of securities were affected by the rating withdrawal. 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Moody’s has also withdrawn HMH’s “corporate family” rating and its probability of default rating, which means the agency believes that there is a high probability of the company defaulting on its debts. These decisions were made by Moody’s based on HMH’s competitive position of the company versus others within its industry, their capital structure, financial risk, projected financial and operating performance, and management’s track record and tolerance for risk.

Image Credit: IRENNA&M