UPDATE 1-Cengage exits bankruptcy after cutting debt by two thirds

Tue Apr 1, 2014 7:37pm EDT

(Adds no comment from Thomson Reuters; authors have continued to receive royalties)

By Nick Brown

NEW YORK, April 1 (Reuters) - Textbook publisher Cengage Learning has ended its nine-month bankruptcy, emerging from Chapter 11 after reducing its $5.8 billion debt by more than two-thirds.

In a statement on Tuesday, Stamford, Connecticut-based Cengage said it cut $4 billion in debt and secured $1.75 billion in new loans to fund its bankruptcy exit. Created in a leveraged buyout led by Apax Partners in 2007, Cengage had been in bankruptcy since July, when it filed with a prearranged restructuring in place.

Apax, along with Omers Capital Partners, bought Cengage for $7.75 billion from Thomson Reuters Corp, the parent of Reuters.

Thomson asserted a $1.46 million unsecured claim against Cengage in its bankruptcy, but Cengage assumed the contract on which the claim was based, meaning Thomson will receive full payment, a spokeswoman for Cengage said on Tuesday.

A spokesman for Thomson Reuters declined to comment.

First-lien lenders will receive most of the company's new equity, with various classes of second-lien lenders and unsecured creditors receiving a share of $225 million in cash or stock. Authors of the books Cengage published have continued to receive royalties owed under their contracts.

Michael Hansen, Cengage's chief executive, touted the deal, saying in a statement it will provide Cengage with "a strong financial foundation providing flexibility and resources to accelerate growth."

Textbook publishers have struggled as more readers get information online. Cengage, with nearly 5,500 employees and about $2 billion in annual revenue, bills itself as the second-largest producer of course materials in U.S. higher education.

The company made headway into digital learning with its CengageCourse line, but other factors have hamstrung the industry, including spending reductions by state and local governments and the growth of the used book and book rental markets.

The case is In re: Cengage Learning Inc, U.S. Bankruptcy Court, Eastern District of New York, No. 13-44106. (Reporting by Nick Brown; Editing by Andre Grenon, Bernard Orr)

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