S&P puts Houghton Mifflin on watch

S&P said it placed Houghton Mifflin Harcourt Co.’s B issuer rating on CreditWatch with negative implications.

The placement follows the company’s announcement that Veritas Capital will acquire it. The financing details have not been disclosed. The deal is expected to close in the second quarter of 2022.

“The CreditWatch placement reflects our belief that the pending acquisition of HMH by affiliates of financial sponsor Veritas Capital will likely increase HMH's debt level, which could weaken the company's credit metrics well beyond our current downgrade threshold and limit HMH's ability to generate free cash flow through the next trough in the addressable K-12 textbook market,” S&P said in a press release.

The agency said it aims to resolve the CreditWatch when it has more details about the deal, including the planned capital structure.

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