By Edward Nawotka
The Financial Times reports that Houghton Mifflin Harcourt’s parent company Education Media & Publishing Group (which is registered in the Cayman Islands) has refinanced its debt, once again avoiding bankruptcy, possibly for the next year or so.
“The agreement will cut EMPG’s long-term debt, now standing at about $7.6bn, by more than $1bn and reduce annual interest costs by $100m, in exchange for a 45 per cent dilution of current shareholders,” said the FT.
That’s a heavy price to pay if you’re a shareholder, though as EMPG CEO Barry O’Callaghan notes, “The old equity realises it’s well under water.” So, he’s saying, swallow your medicine. Earlier this year, O’Callaghan had tried to sell the trade division, but pulled out when the offers came in far less than the $300 million he wanted to make a deal.
Today, he also told the FT he planned to keep the trade division and was hoping to strike gold with trade books in the burgeoning home schooling market.
The school year is approaching, so expect a raft of “digital textbooks are cheaper than printed textbooks” stories, like the one on the front page of today’s Houston Chronicle. Meanwhile, at Publishers Weekly, Lynn Andriani reveals that in December, Cengage Learning will launch CengageBrain.com, “a site where students will be able to rent or buy textbooks” and that “the company said pricing will be 40% to 70% lower than the suggested retail price.”
Andriani points out that “renting” textbooks is part of a growing trend: “Earlier this year, online book rental outfit BookSwim.com began renting college textbooks through a partnership with BookRenter.com and a number of other book rental companies have sprung up,” she writes.
Of course, how different is “renting” a textbook from buying a textbook with the guarantee, often given at the time of purchase, that you may sell it back at the end of the term? The difference strikes me as merely rhetorical. But as the New York Times points out, in its own trend piece, this does offer the opportunity for the publisher to take a royalty on each new purchase of a digital textbook, something that could not be done with a used print copy.