Cengage inks reorganization plan deal with stakeholders and creditors

By Caroline Salls

Pittsburgh, Feb. 3 - Cengage Learning, Inc. reached an agreement with its major financial stakeholders and creditors regarding the terms of an amended plan of reorganization that will allow Cengage to restructure its balance sheet and significantly reduce its outstanding debt to position the company for long-term growth and profitability, according to a company news release.

The company said the amended plan incorporates a global settlement between Cengage Learning, holders of a super-majority of its first-lien, second-lien and unsecured debt, its existing primary equity holder and the official committee of unsecured creditors.

Under the terms of the global settlement, the plan will eliminate more than $4 billion of Cengage Learning's $5.8 billion of outstanding funded debt.

Cengage Learning said it also will secure $1.75 billion to $2 billion in exit financing, of which roughly $250 million will be an undrawn revolving credit facility upon the completion of the company's financial restructuring.

In addition, the current first-lien lenders will receive a substantial majority of the equity of the reorganized company, and second-lien creditors and unsecured creditors will share in $225 million in cash or stock based on total enterprise value of $3.6 billion, at their election.

As part of the settlement, pending litigation among the parties who are signatories to plan support agreements is stayed and will be dismissed upon confirmation of the plan, which will contain releases among the settling parties.

Cengage said the settlement ensures the necessary support from key creditor groups for confirmation of the plan in March. The global settlement will be incorporated into a supplemental disclosure statement and amended plan to be filed for court approval in the near term.

"Under the plan, Cengage Learning will have a new capital structure with a substantially stronger balance sheet and greater financial flexibility to accelerate our growth," chief executive officer Michael Hansen said in the release.

"We are excited about the opportunities resulting from the ongoing transformation of our business to digital products and services."

Cengage, a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets, filed for bankruptcy on July 2, 2013 in the U.S. Bankruptcy Court for the Eastern District of New York. The Chapter 11 case number is 13-44106.

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