Educational content, software and services company Cengage Learning, Inc., US, has announced an agreement with certain of its lenders to restructure its balance sheet and significantly reduce its about $5.8 billion of outstanding debt to better position the Company for long-term growth and profitability.
In order to implement the financial restructuring, Cengage Learning and all of its domestic wholly-owned subsidiaries have filed voluntary petitions for reorganisation under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Eastern District of New York.
In conjunction with the Chapter 11 filing, Cengage Learning entered into a restructuring support agreement with an ad hoc committee of first lien lenders who hold approximately $2 billion of the Company's first lien debt. In this agreement, the lenders committed to support a restructuring transaction that will eliminate more than $4 billion in debt from Cengage Learning's balance sheet and position the Company to implement management's strategic business plan.
Cengage Learning maintains substantial cash balances and expects to generate positive cash flow, and therefore does not need nor intend to obtain debtor-in-possession (DIP) financing. In addition, the Company has reached an agreement with its secured lenders that permits it to continue to use cash flow from operations to continue to fund the business and meet obligations in the normal course during the restructuring process.
Cengage Learning plans to make timely payment to vendors for goods and services provided to the Company during its restructuring in the normal course of business. It is anticipated that employees will continue to receive their usual pay and health and welfare benefits.
Cengage Learning has filed customary 'First Day Motions' with the Bankruptcy Court, which, if granted, will help ensure a smooth transition to Chapter 11 without business disruption and will minimise impact on its employees, customers, authors, content providers, business partners, vendors and suppliers. The motions are expected to be addressed promptly by the Court.
Cengage Learning plans to make timely payment to vendors for goods and services provided to the Company during its restructuring in the normal course of business. The Company fully anticipates that employees will continue to receive their usual pay and health and welfare benefits and is confident that the Court will approve its request to do so.
Cengage Learning's non-U.S. subsidiaries are not included in the U.S. Chapter 11 filings and will continue to operate in the ordinary course without interruption.
