A Sad, Slow, Stupid Death

Once upon a time, in a long ago place when tigers prowled the streets of Dublin, Barry O'Callaghan swallowed up a mighty publisher, and then he sucked up another.

He created an enormous whale of an educational publishing behemoth, but it was sadly bloated by so much debt that most of the wise men predicted its demise.

Bits and pieces of this whale sloughed off, with residue left in Arab lands, but alas, the sheik who ruled that land was going under as well and had to go begging to pay for the world's largest skyscraper. There was little he could do to resuscitate the whale.

 John Paulson took on the bulk of the hulk, investing his hedge fund money into a publishing house that, on paper, seemed like it stood a chance in spite of the wheezing that resembled a death rattle.

The now emaciated whale, known to the world as HMH (from the merger of Harcourt and Houghton Mifflin), has been further reduced by those who rate investments.

HMH debt is down to Caa3.

According to Moody's, the debt is unsustainable unless some significant revenues appear, but those revenues are dependent on textbook sales. State coffers being close to bare, there has been a marked decline in textbook purchases and there is absolutely no indication that buying is going to tick up in the near future.

The only hope of survival is to restructure the debt. Again.

In June of 2014, two years from now, HMH will have to pay back $2.6 billion in loans coming due. Given the current economic climate, it doesn't seem possible to raise that kind of capital in that short a period of time.

Until Barry O'Callaghan came along with his dream, both Harcourt and Houghton Mifflin were muddling along. Now the firms are choking on the very debt that was generated by the minnow when it undertook to swallow a whale.

It doesn't seem likely that the creditors would write off much of the remaining loan, given that they already waved good-bye to $4 billion past due.

Someone, somewhere, might be interested in buying up some minnow-sized pieces in a structured bankruptcy. There's a chance that Harcourt and Houghton Mifflin could survive after shedding all the excess weight that is the debt load.

Oh, yes, and the Celtic Tiger? It's quite dead.