Moody’s rates Houghton Mifflin loan B2

Moody’s Investors Service said it rated Houghton Mifflin Harcourt Co.’s $375 million incremental senior secured first-lien term loan B2. The agency also revised its outlook on the issuer to stable from rating under review and confirmed its credit ratings, including the B3 corporate family rating. This rating action ends the review the agency started on Jan 10.

The rating is the same rating as Moody’s on HMH’s outstanding $1.5 billion term loan.

HMH used the loan along with $575 million of equity from its sponsor Veritas Capital to buy NWEA for $950 million, inclusive of fees, transaction charges, and net working capital changes.

“The stable rating outlook reflects Moody's expectation that financial leverage will decrease to under 6x within 18-24 months post-closing. It also reflects our expectation that HMH will not engage in material debt-financed acquisitions or shareholder initiatives without first reducing its financial leverage and that the company will generate solid free cash flow in 2024,” Moody’s said in a press release.

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