On November 20, 2017, Moody’s Investors Service downgraded Houghton Mifflin Harcourt Publishers Inc.’s (HMH) [Houghton Mifflin Harcourt Company] corporate family rating to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD and its senior secured bank credit facility rating to Caa2 from B3. According to Moody’s, the downgrade reflects continued challenges that HMH faces in the secularly weak K-12 learning materials sector, combined with legacy underinvestment in some of its core products, which is reducing market share in recent adoptions. In addition, Moody’s states that the open territory buying market for 2017 was below industry expectations, further exacerbating weak adoption performance for HMH and a substantial reduction in billings. The Company continues to generate negative free cash flow, however, Moody’s expects HMH to continue its restructuring program to control costs and maintain liquidity, as it returns its focus to the core basal products. Read more on distressed companies.
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