EDUCATION MEDIA Publishing Group (EMPG), the heavily indebted e-learning company led by Cork businessman Barry O’Callaghan, is undertaking a major financial restructuring that could see $600 million (€413 million) in new working capital being injected into the business.
This will change the shareholder structure and could leave Irish private investors, who between them currently control 5.5 per cent of EMPG, owning little or nothing of the business.
The Irish investors have put more than $475 million into the company in the past four years through Dublin-based stockbroker Davy. An informed source said yesterday that the investors would be left with a “minimal” stake.
This is the second restructuring at EMPG in the past six months. A debt-for-equity deal last year diluted the Irish investors by 45 per cent as the company sought to cut its $7 billion debt and its annual interest bill.
EMPG has struggled from the combined effects of the credit crunch and reduced spending in the US on education material.
In a statement yesterday, EMPG said it was in “advanced discussions” on a “comprehensive, consensual balance sheet restructuring” of the business.
“A substantial majority of the company’s most significant lenders have already agreed to the framework for this restructuring plan, which will put the company on a stronger financial footing,” EMPG added. “The plan will enhance liquidity and the company expects to have over $600 million of new working capital to support new growth initiatives.”
US hedge fund Paulson Co, EMPG’s largest lender, confirmed that it is investing in the restructuring.
In a statement, John Paulson, president of the company, said: “We are very supportive of the company’s efforts to optimise its capital structure to support its market leadership position in educational publishing.
“With the dramatic reduction in debt and injection of new capital, I believe Houghton Mifflin Harcourt [EMPG] is well positioned to provide the educational products and solutions that meet the needs of educators and parents around the globe.”
Mr O’Callaghan will continue to lead the business.
News of EMPG’s difficulties broke at lunchtime yesterday when Fine Gael TD George Lee issued a statement claiming that the company had “failed”.
“A number of Irish equity investors have lost significant sums of money as a result,” he added. “Many of these investors were funded through large loans from Anglo Irish Bank, which is now wholly owned by Irish taxpayers.”
An spokesman for Anglo said it did not have a “big exposure” to EMPG.
EMPG was formed in the past four years through two of the biggest corporate transactions in Irish history. In 2006, Irish Riverdeep did a reverse takeover of US publisher Houghton Mifflin in a deal worth $4.95 billion.
In 2008, HM Riverdeep acquired Harcourt, another US publisher, for $4 billion to form EMPG.
