The little minnow has decided not to disgorge the indigestible portion of Houghton Mifflin Harcourt that it was forced to consume. Rather like chomping on a thick and juicy educational materials fillet and drawing back a mouthful of gill. Not what Barry O'Callaghan set out to consume.
As far as anyone can judge, his attempt to sell off HMH's adult trade division is now off the table. Of the three offers that he fished out of some financially troubled waters, not one of them was a keeper. All three were thrown back, in the hope that they would grow.
What does Moody's rating service think, then, of Mr. O'Callaghan's move? He's keeping HMH, and he's named himself as the king fish.
Down go the ratings once again. As far as Moody's is concerned, Education Media Publishing Group, parent of HMH, is more likely than ever to go belly up.
All the cost cutting that's gone on so far is not enough, in Moody's mind, and their negative outlook means that Mr. O'Callaghan's whale-sized conglomerate will have to pay higher interest rates when he goes to the bank for a loan. Given the current economic climate, he may be hard-pressed to find anyone who would be willing to take that kind of risk, on a firm that Moody's rates as Caa3.
States cutting back on purchases of new educational materials, competition from the likes of Pearson and McGraw-Hill....but HMH still has her reputation intact, and that counts for a little something when Mr. O'Callaghan goes calling on his creditors.
The minnow's not dead yet, and with Easter just around the corner, it's time to keep resurrection in mind.
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