Moody's eyes Houghton Mifflin for trim

Moody's Investors Service said it placed Houghton Mifflin Harcourt Co.'s (HMH) credit ratings, including its B2 senior secured bank credit facility, on review for downgrade. The outlook was revised to ratings under review from stable.

The review follows the company's announcement that it agreed to acquire NWEA for an undisclosed amount. No further details are currently available regarding the updated capital structure. HMH expects to close the acquisition within a 90-day period, subject to customary closing conditions.

“Today's rating actions are prompted by governance considerations including uncertainties surrounding the funding of the proposed acquisition of NWEA and its impact on HMH 's capital structure, liquidity, profitability, operational flexibility and business profile. Assuming a material portion of the acquisition is funded with debt, a material increase in leverage and deterioration in credit metrics is possible at closing. The rating review also reflects execution risks associated with the acquisition, including the integration of a not-for-profit organization with a distinct business model into HMH,” Moody’s said in a press release.

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