Chalk it up to a learning experience: too much debt, even in a low interest rate environment, can be costly.
Cengage Learning, a private equity-backed education company, filed for Chapter 11 bankruptcy protection on Tuesday as part of an effort to shrink its $5.8 billion debt load. The company, based in Stamford, Conn., also said that it had entered into a restructuring agreement with lenders who hold $2 billion of its first-lien debt. The restructuring will eliminate more than $4 billion in debt from the company’s balance sheet.
“The decisive actions we are taking today will reduce our debt and improve our capital structure to support our long-term business strategy of transitioning from traditional print models to digital educational and research materials,” Michael Hansen, Cengage Learning’s chief executive, said in a statement.
Cengage was originally Thomson Learning, part of the Thomson media conglomerate of Canada, which sold it for about $7.75 billion in 2007 when the company was preparing to merge with Reuters. The buyers were Apax Partners and Omers Capital Partners — a private equity unit of the Ontario Municipal Employees Retirement Board pension fund.
As Cengage, the company acquired the college publishing division of Houghton Mifflin Harcourt Publishing for $750 million. In 2011, Cengage acquired National Geographic’s digital and print school publishing unit for an undisclosed price.
Cengage said that it planned to make timely payment to vendors for goods and services during its Chapter 11 restructuring and that employees would continue to receive their usual pay and health and welfare benefits. In the filing in the United States bankruptcy court in Brooklyn, the company said it had more than $1 billion in assets.
Cengage’s legal adviser is Kirkland & Ellis, its restructuring adviser is Alvarez & Marsal, and its financial adviser is Lazard.