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Blow for Apax Partners as Cengage files for bankruptcy protection

3 Jul 2013

book pages paper_sqApax Partners-backed college textbook maker Cengage has filed for bankruptcy protection in the US courts as it looks to shed more than $4bn from its $5.8bn debt pile.

The firm bought into Cengage alongside OMERS Capital in 2007, and has since increased its equity stake to about 97 per cent according to the FT.

It said Apax had also bought into the company’s senior debt as Cengage’s fortunes slumped, picking up about $850m of first lien debt and about $425m of junior debt.

The report added that fellow buyout house Apollo Global Management had also previously bought into Cengage’s senior debt but had since sold the stake, although it still holds bank debt.

A statement from the business noted it had substantial cash balances and expected to generate positive cash flow, so did not need nor intent to obtain debtor-in-possession financing.

CEO Michael Hansen said, “The decisive actions we are taking today will reduce our debt and improve our capital structure to support our long‐term business strategy of transitioning from traditional print models to digital educational and research materials.

“Cengage Learning began an operational transformation six months ago under the leadership of our new senior management team, which is executing bold plans to enhance our customer relationships and introduce innovative digital and print products and solutions to meet our customers’ evolving needs.

“A more appropriately‐sized capital structure, along with our established product lines, leading market positions and strong customer relationships, will position us well to accelerate our growth and take advantage of business opportunities in the education and research space.”

Despite the failure Apax managed a $7.5bn final close for its eighth buyout fund last month, within fifteen months of its first close.

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