Reports of Government Funded eLearning Company, Formerly Riverdeep, Goes Bust Amid the Economic Downturn
According to Fine Gael TD George Lee, who has expressed concerns this morning over the large amount of investors taking significant loans through Anglo Irish Bank, the eLearning group that owns Houghton Mifflin Harcourt (Riverdeep) appears to have run aground.
Lee has raised concerns that Irish taxpayers could be left exposed following the reported failure of the company. He said, "It has been reported to me that the education materials company Houghton Mifflin Harcourt has failed, and that a number of Irish equity investors have lost significant sums of money as a result. Many of these investors were funded through large loans from Anglo Irish Bank, which is now wholly owned by Irish taxpayers.
As a company, Houghton Mifflin Harcourt was a highly leveraged operation and had very significant banking commitments. I understand that the remaining US business is to be transferred to its bond holders. However, it appears that its Irish equity investors will lose all of their investment as a result of this failure. This will have repercussions for Anglo Irish Bank, and possibly other Irish banks, and therefore the Irish taxpayer.
This incident adds further weight to Fine Gael's calls for an urgent investigation into the Irish banking crisis. Fuller details of the goings-on within Anglo Irish Bank's risky lending practices are still emerging, and this development with Houghton Mifflin Harcourt sheds further light. However, only a full, forensic investigation into the crisis will ensure that it never happens again."
Houghton Mifflin Harcourt was the result of a reverse-takeover orchestrated by Irish businessman Barry O'Callaghan. It supplied educational resources to a number of US States, and just over a year ago announced plans to create over 450 jobs in a €350m R&D centre in Dublin. The project was backed by Enterprise Ireland. However, in May 2009, two major credit agencies downgraded the company as it struggled to meet approx $1/2bn needed to service the EMPG deficit of $7bn.
It is thought that the Enterprise Ireland funding was in the region of €1m and Lee has called on Tánaiste Mary Coughlan to clarify if the Houghton Mifflin Harcourt situation would have any impact on the 450 jobs announced in September 2008 as part of an e-learning R&D development in south Dublin.
Staff at Houghton Mifflin Harcourt were unaware of the issues when we called the offices, however Education Media & Publishing Group issued the following statement.
“We and our financial and legal advisors are in advanced discussions with the company’s debt holders regarding potential alternatives that would result in a comprehensive balance sheet restructuring to put the company on a stronger financial footing. These discussions have been productive and the company and a concentrated group of holders representing a significant majority of our lenders have agreed to a framework for a proposed plan to implement this final phase of its financial restructuring.
The next step is to approach other lenders to solicit their support (keep in mind the total lender group is small). These developments have no adverse effect on our day-to-day operations, on our employees, or on the nature and quality of the services we provide to our customers and business partners.”
More to follow.
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