S&P cuts, rates Houghton Mifflin loans B-

S&P said it downgraded Houghton Mifflin Harcourt Co.’s issuer rating to B- from B and gave its expected revolver and first-lien term loan B- with 3 recovery ratings (rounded estimate: 60%). The agency also removed the issuer rating from CreditWatch with negative implications, where it was placed on Feb. 23.

Veritas Capital plans to buy the company. It will use the term loan and an unrated second-lien term loan for $390 million to help fund the deal.

“The downgrade reflects a substantial increase HMH's S&P Global Ratings'-adjusted leverage following Veritas' acquisition by Veritas. The acquisition will significantly increase the company's debt burden and will result in leverage of about 11.7x in 2021 pro forma for transaction financing and excluding expected synergies, compared to 2.4x pre-transaction leverage,” S&P said in a press release.

The outlook is stable.

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